The Supreme Court of Canada endorsed legislation creating a unified, pan-Canadian securities regulator, in a unanimous ruling Friday morning.
The quest to create a national securities regulator goes back to 1935 – one corporate lawyer dubs it a “holy grail” of the capital markets – and calls for such a regulatory body have been strong since the 1970s.
Canada is the only G20 country that doesn’t have a national securities regulator.
In 2011, the Supreme Court was unanimous in ruling a proposed national regulator unconstitutional, saying that, as drafted by the federal government, it would have been too closely involved in day-to-day regulation of capital markets – a provincial responsibility.
Under Canada’s 1867 Constitution, the federal government is responsible for trade and commerce, and the provinces have authority over property and civil rights. The Supreme Court left the door open then to the creation of a pan-Canadian regulator involving a co-operative effort.
In 2013, the federal government rewrote its plan for a regulator, called the Capital Markets Regulatory Authority. Five provinces and one territory – Ontario, British Columbia, Saskatchewan, Prince Edward Island, New Brunswick and Yukon – have agreed to participate. Quebec and Alberta oppose the plan, structured as a co-operative agency run by those provinces and territories that choose to opt in. Overseen by a council of ministers from each participating jurisdiction, it was crafted to ensure that the provinces do not cede power to Ottawa.
The Quebec government referred the plan to the Quebec Court of Appeal, which ruled it unconstitutional.
The argument for a national regulator is that it will make the rules more consistent across the country, help regulators manage systemic risks and improve enforcement.