After more than 40 years of debate, the federal government has been rejected in its bid to create a national regulator by the Supreme Court of Canada.
In a decision handed down Thursday morning, Canada’s top court said the federal government’s proposed legislation to create a securities regulator “is not valid under the general branch of the federal power to regulate trade and commerce” under the constitution, and that it would upset the balance of federal and provincial powers.
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The court says that the proposed legislation to create a national regulator would effectively usurp provincial power by duplicating and displacing the existing provincial and territorial regimes, and it ruled that the proposed law does not deal with a matter of genuine national importance, which would allow the feds to claim jurisdiction. “Canada has not established that the area of securities has been so transformed that it now falls to be regulated under the federal head of power,” it says.
Instead, it says that securities regulation deals with essentially provincial concerns that fall within property and civil rights in the provinces. Issues of national importance, such as dealing with systemic risk, are not enough on their own to sustain a viable national scheme, it says. Ultimately, it concludes that the proposed legislation “overreaches genuine national concerns”.
“While the economic importance and pervasive character of the securities market may, in principle, support federal intervention that is qualitatively different from what the provinces can do, they do not justify a wholesale takeover of the regulation of the securities industry which is the ultimate consequence of the proposed federal legislation,” it concludes.
“A co-operative approach that permits a scheme recognizing the essentially provincial nature of securities regulation while allowing Parliament to deal with genuinely national concerns remains available and is supported by Canadian constitutional principles and by the practice adopted by the federal and provincial governments in other fields of activities,” it adds.
The court heard the case back in April, but only handed down its decision today. At the two-day hearing, the federal government argued that it can claim jurisdiction under its trade and commerce power, and that securities regulation is a national concern. It was supported in its position by Ontario, and a variety of interveners from the industry.
The feds were opposed by Alberta, Quebec, and several other provinces, along with several interveners from Quebec, which argued that granting federal jurisdiction would represent an unprecedented federal intrusion into an area of provincial jurisdiction, and that it would dramatically upset the balance of federal and provincial powers — arguments that have found favour with the court.