In a move that will provoke a constitutional showdown with Quebec, the Harper government is asking the Supreme Court to rule on whether Ottawa has the power to create a national securities regulator.
Last night, Quebec, which opposes a countrywide watchdog as an encroachment on its turf, said it "has not budged one iota" from this view and is ready for a fight.
The federal Tories, armed with legal opinions in their favour, are trying to speed resolution of this constitutional question by asking Canada's top judges for a verdict now.
That's because Ottawa is drafting legislation for the spring to create a single commission that could replace Canada's much-maligned patchwork of 13 provincial and territorial securities regulators.
At least two provinces, including Quebec, oppose these plans, calling them an overstepping of Ottawa's bounds. Provinces are not obliged to join this national regulator, but Quebec fears a countrywide body would render any provincial holdouts obsolete.
Ottawa's move pre-empts a legal challenge of the plan for a national regulator that Quebec recently launched at the province's Court of Appeal.
Heading this off allows Ottawa to frame the legal debate itself and begin the battle now, instead of waiting for Quebec's challenge in the lower court to make its way to the Supreme Court.
The risks for Quebec-Ottawa relations in this conflict is that a legal loss for Quebec could fuel the perception it's losing power in the federation. This could place the Charest government in a tight spot and give separatists fodder.
The Tories, who have spent years trying to woo provinces to their plan for a national regulator, say they want to purge any sense that what they are doing is unconstitutional.
"The government strongly believes that Parliament has the constitutional authority to enact a comprehensive federal securities act and is initiating preparatory steps in that direction," Justice Minister Rob Nicholson said Friday.
"An opinion from the Supreme Court of Canada will provide legal certainty to all provinces and territories and market participants, and thus protect the integrity of a Canadian securities regulatory regime," the Tories said.
Legal opinion in Canada is on Ottawa's side, noting that Section 91 of the Constitution Act gives Parliament the power to make law on the "regulation of trade and commerce."
"I think the consensus view among most constitutional scholars is the federal government has the full authority to proceed in the way it's proceeding," said Patrick Monahan, legal scholar and provost of York University.
Prof. Monahan called the Supreme Court reference a wise move, although he warned that Ottawa cannot be certain of what response it will get. "The only caution is you can never take the Supreme Court for granted. There certainly have been cases in the past where federal governments were very confident - and referred matters to the Supreme Court and got unwelcome surprises."
Provinces currently operate their own securities regulators, bodies that develop and enforce the rules for issuing and trading securities such as stocks. They are supposed to safeguard investors and scrutinize conduct. While they have taken steps to work in concert, critics say the remaining patchwork approach still makes it cumbersome to regulate markets and police securities violations.
Finance Minister Jim Flaherty has argued it's archaic for Canada to be one of the few major countries that lacks a single securities regulator.
While a majority of provinces and territories have warmed to his idea, Quebec and Alberta remain holdouts. Quebec's worry is that if the national regulator proceeds, its powers would wane. For instance, a panel advising Mr. Flaherty this year even suggested Ottawa consider allowing companies operating in holdout provinces to choose whether to be regulated by the national regulator or the provincial one.
Quebec and Alberta refused this week to nominate representatives to an advisory committee that will design the national regulator. The Manitoba government remains undecided about participating in this committee because a leadership campaign is under way to replace departing Premier Gary Doer.
Catherine Poulin, spokeswoman for Quebec Finance Minister Raymond Bachand, said the province has not swayed from its view that the interests of Quebeckers and people in other provinces would be best served by provincial regulators.
The separatist Parti Québécois said if the Charest government fails to maintain Quebec jurisdiction over securities regulation, it would be further proof of the need for Quebec to achieve political sovereignty to maintain full control over its economic destiny.