Supreme Court clears the way for national securities regulator

OTTAWA— The Constitution allows Ottawa and the provinces to set up a national securities regulator, the Supreme Court says in a ruling that could help advance a plan for countrywide oversight of capital markets.

In its unanimous ruling Friday, the high court also found that federal draft legislation for national regulation of the trade in stocks, bonds and other investments falls within Parliament’s powers, as it does not tread on provincial turf.

However, the court stressed it is up to the provinces and territories to decide whether participation in a national regulatory system is in their best interests, calling it a “political choice.”

Quebec Finance Minister Éric Girard swiftly reaffirmed the province’s opposition to a national regime. “We acknowledge the Supreme Court of Canada ruling, but intend to retain our autonomy and keep our expertise in Quebec.”

The division of constitutional powers has made Canada an anomaly — a leading industrialized country with a patchwork of provincial and territorial regulators instead of a national one. Supporters of a pan-Canadian regulator say it would eliminate duplication, reduce red tape and ensure more consistent enforcement and investor protection.

Still, the court said it was open to Ottawa and the provinces to exercise their respective powers over securities harmoniously, in the spirit of co-operative federalism. With that in mind, British Columbia, Saskatchewan, Ontario, New Brunswick, Prince Edward Island, Yukon and the federal government signed a memorandum of agreement to create a new regulatory system.

The plan includes a common regulator, a council of ministers to play a supervisory role, a model law that provinces and territories could pass, and fed- eral legislation to manage systemic risk, allow for data collection and address criminal matters.

In July 2015, the Quebec government asked the province’s Court of Appeal to consider the proposal’s constitutional validity. The Quebec appeal court said last year the Constitution does not authorize creation of a Canadian securities regulator under a single body as envisioned in the memorandum of agreement. It also flagged concerns with aspects of the draft federal legislation on the proposed role and powers of the council of ministers. The federal government appealed to the Supreme Court on both matters.

In its decision Friday, the high court said the proposed co-operative system “does not improperly fetter” the sovereignty of legislatures. In addition, the high court concluded, the draft federal legislation falls within Parliament’s trade and commerce powers. The federal role in regulating capital markets would be limited to the detection, prevention and management of risk to the stability of the Canadian economy, the decision noted.