In rejecting the proposed bill to create a national securities regulator, the Supreme Court of Canada failed to see the importance of a single capital market for the contemporary Canadian economy. And while the court repeatedly invoked the concept of co-operative federalism, it did not give real weight to the fact that only those provinces and territories that chose – co-operatively – to opt in would be affected.
It is clear that the Constitution Act, 1867, was designed to create a single economic market – trade and commerce, banking, intellectual property and the currency were all to be matters on which the federal Parliament would legislate. Nevertheless, space was preserved for Quebec’s distinctive Roman/French law on contracts, property and family relationships, by assigning “property and civil rights” to the provinces.
Before the Supreme Court became Canada’s final court of appeal, the Judicial Committee of the Privy Council, in the first half of the 20th century, eviscerated the federal trade-and-commerce power, in favour of the provincial property-and-civil-rights power. On Thursday, the Supreme Court essentially followed in the path of the JCPC, objecting frequently that the proposed Canadian Securities Act would eviscerate the provincial power, in favour of its old federal rival, trade and commerce.
Today, the companies that issue shares and bonds, along with the major investment dealers, perform much of the same function that banks provided at the time of Confederation. That is, they convert savings into capital, and thence into income-earning investments. The regulation of that activity should be on a national scale, making a single market for capital, as Canada’s founders intended.
The Supreme Court took an overcautious view of the legal precedents, and upheld the status quo. But the nine judges did not absolutely lock the door against a future Canadian securities commission; they said that the bill “as presently drafted” was unconstitutional. More particularly, they said that “day-to-day” measures, such as the licensing of individual stockbrokers, did not need to be treated as matters of national scope.
The vital element of a wider, preferably pan-Canadian zone for the governance of Canadian securities is that the corporations that want to sell shares and bonds in Canada should be able to seek approval for their issuance only a few times – ideally, only once. The present requirement to apply in 10 provinces and three territories is a nuisance and a hindrance to the flow of capital.
The Supreme Court evidently favours a co-operative approach. Unfortunately, it did not see that the bill provides just such co-operation, in preserving the provinces’ freedom to opt in or out.