December 2011

In the United States, the Securities and Exchange Commission (SEC) regulates capital markets, including the stock market throughout the entire country.

In Ontario, the Ontario Securities Commission regulates the Toronto Stock Exchange (TSX), while in BC the British Columbia Securities Commission regulates the Vancouver Stock Exchange (VSE). However, there is no single capital markets regulator covering all of Canada.

A nationwide regulator covering all of Canada would ensure that Canada’s financial markets are regulated with the same laws and enforced with the same rigor, fueling Canada’s economy and maintaining Canada’s financial stability. With that aim in mind, the federal government has been trying to create a nationwide securities regulator for Canada for some time, under its proposed Securities Act.  Unfortunately, the creation of a nationwide securities regulator was dealt a setback by the Supreme Court of Canada in the Reference re Securities Act released today.

The problem is that under the Canadian constitution, the federal government has a general power to regulate trade and commerce but each provincial government has the sole power to regulate matters over property and civil rights and matters of a local or private nature within their own province.  The Court held that as it is currently drafted, the proposed Act is not chiefly aimed at genuine federal concerns, but is principally directed at the day‑to‑day regulation of all aspects of securities and is thus unconstitutional.

The Court however recognized that there are specific aspects of the Act aimed at addressing matters of genuine national importance that is distinct from provincial concerns, including the management of systemic risk and national data collection, which the provinces, acting alone or in concert, lack the constitutional capacity to sustain a viable national scheme.

The next step for the federal government then would be to redraft the Securities Act taking into account the Supreme Court’s ruling, and hopefully reintroduce it later on in 2012.  A nationwide regulator is important for Canada as a whole, and the federal government should make it a priority in the new year.