National regulator unconstitutional: Alberta court

The Alberta Court of Appeal ruled today that the federal government’s proposed legislation for a national securities regulator is unconstitutional.

“It is neither appropriate nor necessary for this Court to try and determine whether it is ‘better’ for Canada to have a national, as compared to a provincial, system of securities regulation,” the ruling says. “While the Constitution Act should be interpreted in a contextual way having regard to changing social standards, advances in technology, and developments in the way business is conducted, there are limits to how far the courts should go in reallocating […] constitutional powers.”

“Just because the federal government believes it would be advantageous to concentrate economic power nationally does not alter the terms of the Constitution Act,” the ruling continues.

One of the key pillars of the ruling is the argument that the proposed federal securities legislation assumes an excessively broad interpretation of the federal “trade and commerce” power and would therefore trample on provincial jurisdiction over securities regulation.

“[T]he proposed federal securities legislation would enter an area of regulation long occupied by the provinces, and long considered to be clearly within provincial jurisdiction. The proposed legislation does not meet the traditional tests for inclusion in the ‘trade and commerce’ power, nor is it consistent with the guidelines that have been suggested from time to time for defining the scope of that power.”

“It is inconsistent with numerous prior decisions of the highest courts delineating the division of power over specific industries. The proposed legislation would, if enacted, be unconstitutional.”

The ruling goes on to say that “[i]f the Government of Canada wants a paradigm shift in the power to regulate the securities industry, the way to accomplish that is through negotiation with the provinces, not by asking the courts to reallocate the powers under the Constitution Act through a radical expansion of the trade and commerce power.”