Canadian Parliament was effectively allotted two
options in pursuit of a national securities regulator following
a December 22 Supreme Court ruling
that the Securities Act overreached provincial jurisdiction
over the regulation of property and civil rights.
The first option is to implement a national regulator strictly
for the collection of data to be analysed in the assessment of
The provincial regulators would remain intact and
their duties untouched, thus adding a fourteenth regulator and
further convoluting a system the federal government criticised
for its inefficiency.
Torys partner Glen Johnson thinks systemic risk is
a compelling policy goal, but says implementing a fourteenth
regulatory regime would increase compliance costs among banks
and financial companies.
He said it is unclear how regulators would draw the
line between information gathering and other possible federal
regulatory powers and the day-to-day operations of the capital
markets, which was found to be a provincial responsibility.
"I think the thrust of this legislation is about
coordination and harmonisation," Johnson said. "As important as
the systemic risk might be, it would be off-message to impose
an additional regulatory regime on market participants."
Federal action to implement a national regulator of
systemic risk with national data collection authority as
recognised in the Supreme Court decision would be contradictory
to the intent of the Securities Act and would likely result in
"I think as a practical matter it would be
difficult to layer that on the provincial regime without
stirring up the hornets’ nest again," Johnson
said. "I think it’s more likely that any
developments on this front will be made in cooperation with the
It is unclear how Parliament and the Canadian Securities
Transition Office will respond to the ruling. A Department
of Finance official told IFLR "the federal
government will review the Supreme Court of
Canada’s decision carefully and act in accordance
A second option - a securities regulatory regime
with one regulator having national authority over registration
of securities dealers, filing and disclosure requirements,
derivatives regulation, enforcement remedies and other powers
currently held by provincial regulators - remains a
possibility, however meek.
This remains an option because the court only
rejected the federal government’s claim that
securities regulation was a national concern falling under
trade and commerce powers, and not the constitutionality of a
national regulator implemented in collaboration with provincial
governments as an opt-in system.
While the Securities Act called for an opt-in
system, an approval by the court would have empowered the
government to cite securities regulation as a national concern,
enabling it to use coercive powers in requiring provinces to
"In light of the decision, it remains to be seen
whether the federal government will still pursue this goal and
how many provinces would be willing to participate," Osler
Hoskin & Harcourt partner Jeremy Fraiberg said. "If
there’s a will, there’s a way."
Johnson said the political will to collaboratively
legislate a national regulator "ranges from uncertain to
unlikely at this stage", even though he thinks opposition to
the Securities Act was based in fear of greater intervention
that might have resulted from recognition of federal
jurisdiction in securities regulation.
"It took a lot of political will on the federal
government’s part to push this as far as they
did," Johnson said. "It’s a low-return issue for a
politician. No one is ever going to vote for you because they
are happy with their securities commission."