National Post (National Edition)
Top court clears the way for national markets watchdog
Draft legislation within Ottawa’s authority
TORONTO • The Supreme Court of Canada has cleared the way for the creation of a co-operative federal-provincial securities regulator to govern the country’s capital markets.
Quebec challenged the Cooperative Capital Markets Regulatory System, several years in the making and supported by five jurisdictions including the federal government, B.C. and Ontario, at Canada’s highest court, on the grounds that it exceeded the government’s authority over trade and commerce.
On Friday morning, the Supreme Court ruled that the draft legislation to create the regulator did not exceed Ottawa’s authority, trumping an earlier Quebec court ruling that was appealed by Ottawa.
The court challenges stalled the progress of the CCMR, but proponents believed the idea of a more unified regulatory body for Canada would move ahead.
“Now that the constitutional uncertainty has been removed, market participants and investors … will be watching to see if there is sufficient political will amongst the governments of the participating jurisdictions to take this initiative to the finish line,” said Larry Ritchie, a partner at law firm Osler, Hoskin & Harcourt LLP in Toronto.
Quebec and Alberta have been the strongest opponents to bringing together Canada’s patchwork of 13 provincial and territorial capital markets watchdogs, a unification that has been contemplated in several forms and forums over the past 50 years.
In 2011, the two provinces led a challenge of an earlier attempt by Ottawa to create a single national regulator to govern securities regulation across the entire country.
That time, the Supreme Court of Canada ruled the federal government was overstepping its authority, which led to the creation of the current co-operative model with the participation of Ottawa and willing provinces.
So far, the co-operative regulator, while not truly national, has the support of the federal government, British Columbia, New Brunswick, Ontario, Prince Edward Island, Saskatchewan, and Yukon.
Anita Anand, a law professor at University of Toronto who specializes in securities and governance issues, said Friday’s Supreme Court’s decision was “well-reasoned” and should allow the creation of the new regulator to move forward within the established boundaries.
The court ruled that the current model does not impede provincial powers to enact securities regulation, and held that the federal government has the constitutional power to regulate in the area of “systemic” risk because this type of regulation is not intended to affect day-to-day regulation of securities markets.
With the court’s endorsement of the current regulatory model, Anand said a question remains about where the Liberal government, including Prime Minister Justin Trudeau and Finance Minister Bill Morneau, stand on the idea of a co-operative regulator, which they inherited when they took power.
“They have been conspicuously quiet on the issue of securities regulation in this country, which is surprising given that over 50 per cent of adult Canadians are invested in the capital markets,” she said.
Brigeeta Rochdale, a partner and securities litigator at law firm Cassels Brock & Blackwell in Vancouver, said there isn’t yet a clear timeline for when the new regulator will be functional, but the co-operative model should improve enforcement and harmonize policy interpretation.
“Industries that have been struggling to navigate regulation in Canada will be provided greater clarity in a more transparent and supportive regulatory environment,” she said.