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Supreme Court of Canada endorses legislation creating national securities regulator

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Nov 09, 2018

On November 9, 2018, in a unanimous ruling, the Supreme Court of Canada endorsed legislation creating a unified, pan-Canadian securities regulator. The issue addressed by the Court relates to the constitutionality of a recent proposal by the federal government and the governments of Ontario, British Columbia, Saskatchewan, New Brunswick, Prince Edward Island and Yukon to implement a national cooperative capital markets regulatory system (the “Cooperative System”). The Court found that “the Cooperative System does not improperly fetter the legislatures’ sovereignty, nor does it entail an impermissible delegation of law-making authority.”

By way of background to the ruling:

Canada is the only G20 country that does not have a national securities regulator. The quest to create a national securities regulator goes back to 1935, and calls for such a regulatory body have been strong since the 1970s.

In 2011, the Supreme Court was unanimous in ruling a proposed national regulator unconstitutional, saying that, as drafted by the federal government, it would have been too closely involved in day-to-day regulation of capital markets – a provincial responsibility. Under Canada’s 1867 Constitution, the federal government is responsible for trade and commerce, and the provinces have authority over property and civil rights. The Supreme Court, however, left the door open to the creation of a pan-Canadian regulator involving a co-operative effort.

In 2013, the federal government rewrote its plan for a regulator, called the Capital Markets Regulatory Authority. Five provinces and one territory – Ontario, British Columbia, Saskatchewan, Prince Edward Island, New Brunswick and Yukon – have agreed to participate. Quebec and Alberta oppose the plan, structured as a co-operative agency run by those provinces and territories that choose to opt in. Overseen by a council of ministers from each participating jurisdiction, it was crafted to ensure that the provinces do not cede power to Ottawa.

The Quebec government referred this plan to the Quebec Court of Appeal, which ruled it unconstitutional in 2017.

The Attorney General of Canada then appealed the Quebec Court of Appeal’s opinion to the Supreme Court of Canada, which has now ruled, on November 9, 2018, in favor of the Attorney General of Canada’s appeal i.e. that the plan for a co-operative agency run by those provinces and territories that choose to opt in is not unconstitutional.

Re­view today’s article in the Globe & Mail and the ruling of the Supreme Court of Canada for further details.

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