SCC Releases Opinion on Securities Regulation

The Government of Canada created legislation regulating securities and referred the following question to the SCC: Is the annexed Proposed Canadian Securities Act within the legislative authority of the Parliament of Canada? The reference was directed under s. 53 of the Supreme Court Act.

On December 22, 2011, the Court held that the Securities Act was not a valid exercise of federal power, pursuant to Constitution Act, 1867 (CA). The following summarizes the Court's answer: the provinces have jurisdiction to regulate securities within their boundaries as matter of property and civil rights, under s. 92(13) of the CA. General trade and commerce power given to the federal government under s. 91(2) of the CA does not encompass all trade and commerce. The immediate object of the Act did not shed light on whether subject matter of the Act was federal or provincial. The stated goal of investor protection was historically a provincial responsibility under s. 92(13) of the CA. Fostering fair, efficient and competitive capital markets had aspects of federal and provincial jurisdictions. The integrity and stability of Canada's financial system also had a federal aspect. The intended follow-through effect of the proposed Act was to subsume existing legislative schemes governing securities. Many provisions were duplicative of provincial schemes. Information collection and protection from systemic risk were matters that the federal government identified as matters which transcended the bounds of a specific province.

The Court held that, the Act did not address a matter that was truly national in nature and scope. The law was part of a general regulatory scheme under the oversight of a regulatory agency. The Act was directed at a particular industry and descended beyond national concerns such as preserving capital markets to engage in detailed instructions for dealing in all aspects of trading in securities. Dealing in securities had not changed in nature over time so that it was required to be regulated under a different head of power. Day-to-day regulation of securities within provinces, which represented the main thrust of the Act, remained essentially a matter of property and civil rights within the provinces and was therefore subject to provincial power. The provinces partially lacked constitutional capacity to make a viable national scheme and possess constitutional capacity to enact uniform legislation on most administrative matters covered by the proposed federal Act, but also have inherent prerogative to resile from interprovincial schemes. Only on certain issues, such as systemic risk and information collection, could the non-participation of a province prevent a national system from being effective. The matter was not one of a valid federal scheme incidentally intruding on provincial powers.

Robert Frater (Department of Justice Canada), Peter Hogg, QC (Blake, Cassels & Graydon LLP's Scholar in Residence and Professor Emeritus at Osgoode Hall Law School), and Claude Joyal, QC, and Alexander Pless (Department of Justice Canada) represented the Attorney General of Canada.

Janet Minor, Jennifer August and Zachary Green of the Ministry of the Attorney General of Ontario represented the intervenor the Attorney General of Ontario.

Jean-Yves Bernard, Ad E, France Bonsaint and Hugo Jean of the Ministère de la Justice du Québec represented the intervenor the Attorney General of Quebec.

Gaétan Migneault of the Office of the Attorney General of New Brunswick represented the intervenor the Attorney General of New Brunswick.

Eugene Szach and Nathaniel Carnegie of the Department of Justice of Manitoba represented the intervenor the Attorney General of Manitoba.

George Copley, QC, Nancy Brown and Donald Sutherland of the Ministry of the Attorney General of British Columbia represented the intervenor the Attorney General of British Columbia.

Graeme Mitchell, QC, of the Saskatchewan Ministry of Justice and Attorney General represented the intervenor the Attorney General for Saskatchewan.

David Tavender, QC, of Fraser Milner Casgrain LLP (FMC) Brian Foster, QC, of FMC, L. Christine Enns of the Ministry of Justice and Attorney General of Alberta and Jordan Milne of FMC represented the intervenor the Attorney General of Alberta.

Andrew Lokan, Massimo Starnino and Michael Fenrick of Paliare Roland Rosenberg Rothstein LLP represented the intervenor the Canadian Foundation for Advancement of Investor Rights.

Luis Sarabia, Matthew Milne-Smith and David Stolow of Davies Ward Phillips & Vineberg LLP represented the intervenor the Canadian Coalition for Good Governance.

John Laskin and Darryl Patterson of Torys LLP represented the intervenor the Investment Industry Association of Canada.

Mahmud Jamal, Éric Préfontaine and Raphael Eghan of Osler, Hoskin & Harcourt LLP represented the intervenor the Canadian Bankers Association.

Kelley McKinnon and Brent Arnold of Gowling Lafleur Henderson LLP represented the intervenor Ontario Teachers' Pension Plan Board.

Guy Paquette and Vanessa O'Connell-Chrétien of Paquette Gadler Inc. represented the intervenor Mouvement d'éducation et de défense des actionnaires.

Raymond Doray and Mathieu Quenneville of Lavery, de Billy, L.L.P. represented the intervenor Barreau du Québec.

Sébastien Grammond of the University of Ottawa Faculty of Law and Luc Giroux and Mélisa Thibault of Fraser Milner Casgrain LLP represented the intervenor the Institute for Governance of Private and Public Organizations.