Plan to create a national securities regulator is constitutional: Supreme Court

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OTTAWA — The Supreme Court of Canada says the Constitution allows Ottawa and the provinces to set up a national securities regulator.

In its unanimous ruling today, the high court also finds federal draft legislation for countrywide oversight of stocks, bonds and other investments falls within Parliament’s powers on trade and commerce.

The decision could help advance plans for a national regulator of capital markets, an idea under discussion since at least the 1930s.

Supporters of the concept say it would eliminate duplication, reduce red tape and ensure more consistent enforcement and investor protection.

But the division of constitutional powers has made Canada an anomaly — a leading industrialized country with a patchwork of provincial and territorial regulators instead of a national one.

In an earlier ruling, the Supreme Court said in 2011 that a draft bill to create a national regulator strayed beyond federal jurisdiction, as the provinces and territories have constitutional authority over most elements of securities regulation.

However, the court said it was open to Ottawa and the provinces to exercise their respective powers over securities harmoniously, in the spirit of co-operative federalism.

With that in mind, British Columbia, Saskatchewan, Ontario, New Brunswick, Prince Edward Island, Yukon and the federal government signed a memorandum of agreement to create a new regulatory system.

The plan includes a common regulator, a council of ministers to play a supervisory role, a model law that provinces and territories could pass, and federal legislation to manage systemic risk, allow for data collection and address criminal matters.

In July 2015, the Quebec government asked the province’s Court of Appeal to consider the proposal’s constitutional validity.

The Quebec appeal court said last year the Constitution does not authorize creation of a pan-Canadian securities regulator under a single body as envisioned in the memorandum of agreement. It also flagged concerns with aspects of the draft federal legislation on the proposed role and powers of the council of ministers.

The federal government appealed to the Supreme Court on both matters.

In its decision today, the high court says the proposed co-operative system “does not improperly fetter” the sovereignty of legislatures. In addition, the draft federal legislation falls within Parliament’s trade and commerce powers under the Constitution, the court concludes.

Jim Bronskill, The Canadian Press


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