Top court clears the way for na­tional mar­kets watch­dog

Draft leg­is­la­tion within Ot­tawa’s au­thor­ity

National Post (National Edition) - - FINANCIAL POST - BAR­BARA SHECTER

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.


A de­ci­sion from the Supreme Court of Canada on Fri­day trumped a rul­ing from a Que­bec court that stalled progress on the Co-op­er­a­tive Cap­i­tal Mar­kets Reg­u­la­tory Sys­tem.

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