12 November 2018

National securities regulator is constitutional, says Canadian court

In long-running battle to create a national securities regulator, supreme court of Canada rules it is constitutional.

The supreme court of Canada has ruled that the Constitution allows the federal, provincial and territorial governments to work together to regulate securities trading under a single system in Canada.

Quebec overturned

The ruling that a proposed co-operative pan-Canadian securities regulator is constitutional overturns a finding of the Quebec appellate court. Canada is one of the only developed countries in the world that does not have a national regulator to oversee securities trading. Past efforts to establish a national securities regulator has been hampered by a series of delays and barriers. In 2011, the federal government asked the supreme court whether parliament could pass a federal law creating a single regulator but was informed that under the Constitution the provinces and territories hold power over most aspects of securities regulation, though a cooperative approach was possible. A Quebec decision in 2015 said it was not acceptable.

Cooperative decision

The latest decision states the Constitution allows the federal, provincial and territorial governments to work together to regulate securities trading under a single, unified system in Canada. A pan-Canadian regulator will get its authority from a Council of Ministers formed from the federal government and the provinces and territories participating. Provincial and territorial legislatures are not required to join a common regulatory system. The two-part ruling says ‘the cooperative system does not improperly fetter the legislatures’ sovereignty, nor does it entail an impermissible delegation of law-making authority,’ and ‘our view is that the subject matter of the Draft Federal Act falls within the general branch of Parliament’s trade and commerce power pursuant to s. 91(2)  of the Constitution Act, 1867.’ Today’s decision will allow a ‘Cooperative Capital Markets Regulatory System’ to be formed, and, potentially, other pan-Canadian regulatory systems.