Federal Securities Regulation

By: John Magyar · November 5, 2009 · Filed Under Constitutional Law, Regulatory Law, Securities Law, Uncategorized · Comments Off 

On Oct 22 an anonymous Law is Cool contributor posted a comment about the Federal Government’s intention to submit a reference to the SCC about whether a federal securities regulator is intra vires the Constitution.   As expected, Quebec is going to resist any efforts by the federal government to regulate that which has traditionally been regulated by provinces, according to the Globe and Mail.  However, there are a number of issues which always get glossed over when the matter is discussed.  For example, the SEC is always cited as an example of a federal securities body.  Somehow Canada is behind the times because we are not like the U.S. in this respect.  However the SEC shares jurisdiction with State regulators, and I doubt that the Canadian government wishes to duplicate this model.  The implicit intention of creating a federal regulator is that it be a single national regulator rather than one more regulator in addition to all of the provincial & territorial regulators.

This raises the sticky point about covering the field.  It is one thing to ask the SCC if the federal government has the authority to regulate securities (and this is an empty exercise — few legal scholars doubt that the federal government can do so).  It is another thing to ask the SCC to hand ALL authority to regulate everything associated with securities over to the federal government.  This would be an enormous restructuring of the balance between national concerns and property & civil rights.   There are political ramifications to such a ruling and no doubt the Court would prefer that such an invasive move be made through negotiations between governments rather than via a reference to the SCC.

It should be noted that securities regulation in Canada grew up under a provincial head of power.  As a result, it is written in the language of property and civil rights.   I have no idea if this is significant with respect to “federalizing” the laws, but I wonder.  If the SCC decides that some securities transactions are federal and some are not, then the language of the laws could become significant.  A ground-up rethinking and rewording might be in order.

The take-home point:  The transition to a single Federal securities regulator seems quite simple at first blush, but it is not.

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