Supreme Court Opinion on Proposed National Securities Act

On December 22, the Supreme Court of Canada (SCC) released its decision on the constitutional reference, stating that the federal government’s proposed national Securities Act was unconstitutional because, viewed in its entirety, the proposed Act included matters that remain essentially provincial concerns. While the SCC stated that elements of the proposed Act were of national concern, it found that the proposed Act overreaches genuine national concerns.

The SCC’s decision was clear that the federal government does have constitutional jurisdiction in several core areas of securities regulation, such as “fair, efficient and competitive markets and the integrity and stability of Canada’s financial system, including national data collection and prevention of and response to systemic risks…” These, however, were not viewed by the SCC to be the chief aim of the proposed Act. The SCC also noted that there are some aspects of securities regulation that the Provinces are not constitutionally capable of addressing properly.

The SCC did not close the door on the idea of a national securities regulator, commenting that “[t]he common ground that emerges is that each level of government has jurisdiction over some aspects of the regulation of securities and each can work in collaboration with the other to carry out its responsibilities…. we may appropriately note the growing practice of resolving the complex governance problems that arise in federations, not by the bare logic of either/or, but by seeking cooperative solutions that meet the needs of the country as a whole as well as its constituent parts.”

The SCC also stated “…a cooperative approach that permits a scheme that recognizes the essentially provincial nature of securities regulation while allowing Parliament to deal with genuinely national concerns remains available.” FAIR Canada is hopeful that, moving forward, these comments lead to the development of a more cooperative framework in order to better protect Canadian investors.

FAIR Canada’s Executive Director, Ermanno Pascutto, appeared on BNN Headline to discuss the SCC’s decision with Tom Hockin (Canada’s representative to the IMF) and Ian Russell (CEO of IIAC). FAIR Canada hopes that the New Year will bring the kind of Federal-Provincial cooperation that other federations (like Australia) have displayed to find a solution that addresses Canada’s needs while recognizing the important role of the Provinces.

In an Update on the SCC’s decision, Osler, Hoskin & Harcourt LLP comments “…the Supreme Court decision is not an insurmountable roadblock to the longstanding quest for a Canadian regulator, but rather a bend in the road that will provide all parties with greater visibility with respect to the constitutional landscape that must be navigated in order to get to this destination.”

December 23, 2011