Quebec, Alberta fail to stop new securities regime
Supreme Court dismisses challenge to national regulator
THE SUPREME Court of Canada has ruled in favour of proposed laws that would enable a national securities regulator. The court has determined that the laws are within Parliament’s authority and are allowable under the Constitution. This is largely because the national regulator and its rules would not be binding on the provinces, at least from a legal perspective. The decision is a loss for the provinces of Quebec and Alberta, which oppose a national regulator and had challenged the proposed laws on constitutional grounds. They contended that the laws infringed on the rights of the provinces to set their own rules. The national regulator would have the effect of “fettering the sovereignty” of participating provinces, they complained.
The Supreme Court, however, has ruled completely against them. In a decision released on Friday, Nov. 9, the court has determined that under the proposed national regulator, the provinces will still control their securities rules. While the provinces may be compelled by political
or other reasons to follow the guidelines set down federally, from a legal perspective they would always have the option to make their own laws. Friday’s decision is a step toward a national regulator, but it does not compel any provinces to join the plan. Quebec and Alberta will be free to retain their provincial securities commissions. Likewise, the other provinces will be free to join the national plan. So far, Ontario and B.C. are the main proponents of a national regulator, although many others (Saskatchewan, New Brunswick, Prince Edward Island and Yukon) have stated support for the idea. The court case centred around the way that the securities laws would be determined under the proposed national regulator. Responsibility for securities laws would fall to a council of ministers. The members of this council would be the federal Minister of Finance and his counterparts from the participating provinces. Amendments to the law would go to a vote, and would require approval from at least 50 per cent of the members. (At present, the council would only comprise the federal Minister of Finance and representatives from B.C. and Ontario, as those are the only jurisdictions that have signed on to the plan.)
Much of the complaint from Quebec and Alberta had to do with the fact that the council would be determining their securities laws if they were to opt into this plan. As they saw things, they could find themselves shut out of changes to their securities laws. If they were opposed a particular amendment, that amendment could still pass if a sufficient number of the other provinces approved it. This could leave Alberta or Quebec having to adopt changes to their securities rules that they did not determine.
As the Supreme Court sees things, this is simply not the case. Legally speaking, the
new laws would not be binding on any province. The legislature of each participating province would remain free to reject the proposed laws and any amendments to them. The Supreme Court was careful to distinguish the legal effect of the proposed laws from what may occur in the political arena. The political objective is, of course, to create a unified set of securities rules. Each prov ince t hat signs on would have to agree to adopt the proposed rules and any amendments that follow. These provinces would also have to dissolve their respective securities commissions and merge them into a national structure. This would make it difficult for these provinces to extricate themselves from the national regulator. From a legal perspective, however, the provinces would still retain the ability to leave and the ability to make their own securities rules, the court determined.
As with most court decisions that end up at the Supreme Court level (and particularly those that deal with constitutional issues), most of the 90-page decision is devoted to a lengthy legal analysis, along with the accompanying barrage of legalese. The word “constitution” appears 137 times in the ruling. The word “legislative” is in 49 places, while “statute” is in 49 places.
The number of lawyers involved is also an impressive 18, a figure that ordinary court rooms would struggle to accommodate. The attorney generals of Canada, Quebec, B.C. Ontario, New Brunswick, Manitoba, Prince Edward Island, Saskatchewan, Alberta and Quebec all sent representatives. Also present was the Institute for Governance of Private and Public Organizations. (The IGOPP, for short, is an organization that examines executive compensation, the independence of board members and the use of dual class share structures.) The case was heard on March 22, 2018, by all nine Supreme Court judges.