The Canadian federal government's plans to create a single national securities regulator were dealt a blow Thursday after the Supreme Court of Canada ruled the proposed Securities Act unconstitutional.
“In sum, the proposed act overreaches genuine national concerns,” according to the court's decision. “While the economic importance and pervasive character of the securities market may, in principle, support federal intervention that is qualitatively different from what the provinces can do, they do not justify a wholesale takeover of the regulation of the securities industry which is the ultimate consequence of the proposed federal legislation.”
However, the Supreme Court did say a cooperative approach was supported by the Constitution.
Each provincial government in Canada has its own securities regulator. The Government of Canada proposed that a single agency, similar to the U.S. Securities and Exchange Commission, oversee the country's securities industry. The government had referred the proposal to the Supreme Court for review.
Katie Walmsley, president of the Portfolio Management Association of Canada, a group representing more than 150 firms that oversee more than C$800 billion ($783.8 billion) in assets, said the “door is not closed for a national regulator” but a rewrite will be needed with softened rhetoric and narrowed powers for the federal government.
Canadian institutional money managers support the proposal, which the PMAC argues streamlines regulation, increases protection against fraud and white-collar crime, provides consistency for businesses operating across Canada's provinces, strengthens the financial system by developing faster policy responses to emerging trends and creates more efficient capital markets.
There has been progress in recent years to harmonize regulations across provinces, “but it's not as efficient as it could be,” Ms. Walmsley said.
Canada is the only major industrialized nation in the world without a national securities regulator, Ms. Walmsley said.
“I think there's been concern (among the act's opponents) that there's going to be a strong centralist power … that translates to less local decision-making and responsibility,” Ms. Walmsley said.
The court's ruling is online.