The federal government’s proposal to create a national securities watchdog is a violation of the Constitution and an intrusion into a provincial jurisdiction that defies a recent a Supreme Court of Canada ruling, says Quebec Finance Minister Nicolas Marceau.
Mr. Marceau said the Quebec government will challenge the federal legislation the moment it is tabled in Parliament, likely early next year. He accused Ottawa of wanting to create a national regulator as part of an effort to dismantle the current securities regulation system jointly run by the provinces, which was upheld by the top court in December, 2011.
“We are talking about a long legal battle. And we are prepared to do whatever it takes to protect our jurisdiction,” Mr. Marceau said in an interview with The Globe and Mail. “After close examination of Ottawa’s proposal, we can’t see how it could be drafted in a bill without violating the Constitution. It would be tantamount to the provinces abdicating their jurisdiction in regulating markets.”
According to Mr. Marceau, the proposal unveiled by federal Finance Minister Jim Flaherty last September violated the Supreme Court of Canada ruling on several fronts. “Ottawa cannot intervene in the adoption of regulations of securities commissions. That’s a clear violation. And we are convinced that the proposal is an intrusion in an exclusive provincial jurisdiction,” the minister said.
Quebec and Alberta were at the forefront of a previous legal battle that ended with a Supreme Court decision that prevented Ottawa from moving forward with its plan to create a federal securities regulator. However, the ruling left the door open for Ottawa to reduce “systemic risks” in the capital markets, such as the one stemming from asset-backed commercial paper transactions that contributed to the 2008 global financial crisis.
Mr. Flaherty proposed to create what he called a “co-operative” regulator where Ottawa, along with Ontario and British Columbia, would create a new oversight body to watch over a significant portion of the country’s capital markets. According to Quebec, the proposed watchdog would be in direct competition with the current provincial system.
“This is not a proposal that is limited to reducing systemic risks. It goes much further than that. This will be part of the case we will make before the Quebec Court of Appeal when we move to challenge,” the Quebec Finance Minister said. “Should Ottawa move ahead with its proposal and it is successful, it will spell the end of securities commissions in the provinces. Ottawa will have indirectly achieved its objective of eliminating the provinces’ jurisdiction.”
Mr. Marceau said he will outline his government’s position before his provincial counterparts in a meeting near Ottawa on Tuesday. He said other provinces will join Quebec’s efforts to stop the federal initiative but refused to say who his potential allies would be in the fight that eventually could pit Quebec and as many as seven other provinces against Ontario, British Columbia and Ottawa.
“I can tell you that a lot of the provinces that will be present at the meeting next week will come forward and back our initiative,” Mr. Marceau said.
During next week’s meeting, provinces will also adopt changes to improve harmonization among the different provincial securities regulators and make the current system more efficient for investors, Mr. Marceau said.