In the United States, the Securities and Exchange Commission (SEC) regulates capital markets, including the stock market throughout the entire country.
In Ontario, the Ontario Securities Commission regulates the Toronto
Stock Exchange (TSX), while in BC the British Columbia Securities
Commission regulates the Vancouver Stock Exchange (VSE). However, there
is no single capital markets regulator covering all of Canada.
A nationwide regulator covering all of Canada would ensure that
Canada’s financial markets are regulated with the same laws and enforced
with the same rigor, fueling Canada’s economy and maintaining Canada’s
financial stability. With that aim in mind, the federal government has
been trying to create a nationwide securities regulator for Canada for
some time, under its proposed Securities Act. Unfortunately, the creation of a nationwide securities regulator was dealt a setback by the Supreme Court of Canada in the Reference re Securities Act released today.
The problem is that under the Canadian constitution, the federal
government has a general power to regulate trade and commerce but each
provincial government has the sole power to regulate matters over
property and civil rights and matters of a local or private nature
within their own province. The Court held that as it is currently
drafted, the proposed Act is not chiefly aimed at genuine
federal concerns, but is principally directed at the day‑to‑day
regulation of all aspects of securities and is thus unconstitutional.
The Court however recognized that there are specific aspects of the Act
aimed at addressing matters of genuine national importance that is
distinct from provincial concerns, including the management of systemic
risk and national data collection, which the provinces, acting alone or
in concert, lack the constitutional capacity to sustain a viable
The next step for the federal government then would be to redraft the Securities Act
taking into account the Supreme Court’s ruling, and hopefully
reintroduce it later on in 2012. A nationwide regulator is important
for Canada as a whole, and the federal government should make it a
priority in the new year.