Québec Court Of Appeal Finds Aspects Of The Proposed Co-Operative Capital Markets Model Unconstitutional

In response to a reference from the Government of Québec, the Québec Court of Appeal has concluded that while the governance framework for the co-operative capital markets regulatory regime, as proposed, is unconstitutional, the federal government's proposed Capital Markets Stability Act (the CMSA) is substantially within its constitutional competence.[1]

Background

The Supreme Court of Canada held in 2011 that the then-proposed Securities Act to establish a national securities regulatory regime under the administration of a single national securities regulator would have been unconstitutional.[2] Although the Supreme Court found that the proposed Securities Act overreached into the provinces' constitutional powers over property and civil rights, it left open the possibility of targeted federal securities legislation addressing issues that transcend provincial boundaries, such as provisions to control systemic risk and nationwide data-collection.

Following the Supreme Court reference, in 2014, the federal government and the governments of five provinces and one territory entered into the Memorandum of Agreement regarding the Cooperative Capital Markets Regulatory System (MOA). The MOA called for the creation of a co-operative capital markets regulatory regime under the oversight of a national regulatory authority. The primary components of the co-operative model set out in the MOA are as follows:

Multi-jurisdictional oversight: The model would be administered by a single regulatory authority, the Capital Markets Regulatory Authority (CMRA), and supervised by a Council of Ministers consisting of the Minister of Finance of Canada and the responsible ministers in each of the participating provinces. The Council of Ministers would supervise the CMRA and approve amendments to the legislative framework and regulations made under it. The MOA outlines the intended voting mechanisms for the Council of Ministers. Capital Markets Act (the Uniform Act): Participating provinces would each enact the Uniform Act for the regulation of capital markets within that province. The administration of the Uniform Act in each participating province would be delegated to the single CMRA. Capital Markets Stability Act (the CMSA): In addition to the provincial Uniform Acts, Parliament would enact the CMSA, the administration of which would be delegated to the CMRA. The CMSA would address systemic risk, national data collection, and criminal law, and would apply across...