The Supreme Court of Canada (SCC) released its decision on November 9, 2018, holding that the proposed co-operative pan-Canadian securities regulator, known as the Cooperative Capital Markets Regulatory System (CCMR), is constitutional.
Background and Analysis
The CCMR first emerged in 2014 following the rejection of an earlier proposal by the SCC in 2011 on the basis that the main thrust of the earlier proposal was for the federal government to regulate, on an exclusive basis, all aspects of the trade in securities in Canada.
The CCMR was developed by Ontario, British Columbia, Saskatchewan, Prince Edward Island, New Brunswick, Yukon, and Canada and is comprised of four key elements:
- A federal law, the Capital Markets Stability Act, addressing criminal matters, matters related to systemic risk and national data collection;
- Uniform provincial/territorial securities laws based on a model Capital Markets Act;
- A national securities regulator, the Capital Markets Regulatory Authority, whose powers would be delegated to it by the federal, provincial and territorial governments; and
- A council (Council of Ministers) comprised of the ministers responsible for capital markets regulation in the participating provinces/territories and the federal Minister of Finance that would supervise the Capital Markets Regulatory Authority and approve certain proposed legislative changes and regulations.
Quebec and Alberta opposed the CCMR, and Quebec referred the matter to the Quebec Court of Appeal. The Quebec Court of Appeal took issue with the fourth element of the CCMR on the basis that the Council of Ministers and its power to amend legislation and adopt regulations infringes on the legislative sovereignty of the participating jurisdictions and reflects an impermissible delegation of authority.
The matter was then referred to the SCC, who unanimously reached a different conclusion. Namely, that the Constitution of Canada authorizes the implementation of the CCMR, and that the proposed system does not improperly fetter provincial sovereignty and does not entail an impermissible delegation by the Parliament of Canada of law-making authority, and that the proposed federal act does not exceed the authority of Parliament over provincial powers related to the regulation of trade and commerce.
Although the decision removes uncertainty as to the constitutional validity of the proposed system, provincial and territorial legislatures are not required to join. It remains to be seen if, and which of, the various governments will move forward on the proposed system.