A National Securities Commission? The Headless Horseman Rides Again
| Author | Jeffrey G. MacIntosh |
| Pages | 223-277 |
• 223
A National Securities Commission?
e Headless Horseman Rides Again
Jeffrey G. MacIntosh
A. Introduction
According to the website of the Canadian Securities Transition
In June 2009, the Government of Canada launched the initia-
tive to transition from the current system of 13 provincial and
territorial regulators to a single Canadian securities regula-
I argue here that the prospect of creating a single national regu-
lator, whether federally or provincially constituted, was never
more than a chimera. Under the doctrine of paramountcy, the
draft federal legislation that was the subject of the Reference Re
Securities Act1 would not have displaced provincial legislation.
Thus, given the state of Canadian politics, even if the federal gov-
ernment had been successful in arguing that its legislation was
constitutional, this would merely have been the prelude to a dif-
provinces would have joined the federal scheme.2 Inevitably, some
would have remained outside the fold. It is therefore clear that
some kind of passport system lies in Canada’s securities regula-
2 As I note below, because the three territories hold power delegated from
the federal government, they can be forced to join a national commission.
• .
tory future. Only the identities and numbers of participants in
the passport system remain in question.
Because of the controlling nature of political factors, the de-
cision of the Supreme Court in the Securities Reference is likely
-
lihood that Canada will get a single securities regulator. Both
before and after the Securities Reference, cooperative federali sm
was the only way forward. The decision adds some measure of
certainty about what the federal government can and cannot do.3
However, a federally constituted multijurisdictional regulator
was, and remains, an inferior option to a provincially constituted
regulator, since (regardless of the result of the Securities Refer-
ence), the latter is virtually certain to attract more sign-ups.
While some have criticized the Securities Reference as a throw-
back to a prior epoch of constitutional adjudication, or the product
of political forces, I argue that it is a well-reasoned decision fully
consistent with prior (and recent) Supreme Court jurisprudence.
indicia for validity set out in General Mo-
tors of Canada Ltd. v City National Leasing
4 centre on a single
theme: sustaining the federal union by maintaining a workable
balance of power between the federal and provincial governments.
As the Court emphasizes, the draft federal statute was a virtual
copy of existing provincial statutes; upholding this legislation
under the trade and commerce power, therefore, would potential-
ly have wrought massive change in this delicate balance, ced-
ing to the federal government the power to aggressively enter a
wide array of new domains heretofore occupied only or mainly by
the provinces. Particularly given the futility of pursuing a single
commission under the aegis of the federal government, effecting
3 At least two sources of uncertainty remain, however. First, the Court
indicated, but only in very general terms, and only in obiter dictum,
what kinds of federal legislation might meet the test of constitutionality.
branch of the trade and commerce power. Thus, it is possible to argue
that the federal government still has a window to legislate under the
international and interprovincial branch of the trade and commerce
power, or other heads of power such as criminal law, banking law, etc.
See generally Philip Anisman & Peter W Hogg, “Constitutional Aspects
of Federal Securities Legislation” in Philip Anisman et al , eds, Proposals
for a Securities Market Law for Canada (Ottawa: C onsumer and Corpo-
rate Affairs Canada, 1979).
4 General Motors of Canada Ltd v City National Leasing
[General Motors].
A National Securitie s Commission? • 225
such a massive shift of power in favour of the feds would have
In addition, it cannot be said that the holding is a departure
from either the “double aspects” or the “incidental effects” doc-
trine. The Court was clearly right in rejecting both on the ground
that the proposed federal legislation was a virtual copy of existing
provincial legislation.
The Securities Reference does, however, highlight some dif-
General Motors
criterion that does not degenerate into a reductio ad absurdum.
I also suggest that double aspects, concurrency, separation of
powers, cooperative federalism, and paramountcy interact much
like elements in a mechanical analog computer: when one of these
is changed, corresponding changes must be made in all of the
powe r.
provincial homeostasis is a key judicial imperative, division of
powers adjudication is inevitably path dependent and subject to
have been the case in relation to securities regulation.
B. Path Dependency and First-Mover Advantages in
Division of Powers Adjudication
-
teria for validity in General Motors without understanding the
path dependency of constitutional adjudication. I thus start my
analysis here.
A pivotal factor in the Court’s decision in the Securities Refer-
ence was the extent to which the provinces had already staked out
the territory of securities regulation for themselves. The Court
stated, for example, that “[w]hile it is obvious that the securities
market is of great importance to modern economic activity, we
cannot ignore that the provinces have been deeply engaged in the
regulation of this market over the course of many years.”5 Indeed,
it was the nearly perfect overlap between the proposed federal
5 Securities Reference, above note 1 at para 115.
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