A Real And Substantial Connection? Saskatchewan Court Of Appeal Affirms The Jurisdictional Question For Securities Regulators

The law has long recognized the geographic limits of governments' legislative powers. For example, Canada is unable to pass laws which apply in the United States. In Canada, a similar recognition applies amongst Canadian provinces: Saskatchewan does not have the power to pass laws which regulate extra-provincial activity. This limit on provincial powers is a key part of our Constitutional framework.

The Saskatchewan Court of Appeal recently applied the doctrine of "territorial limits" in Berger v Saskatchewan (Financial and Consumer Affairs Authority), 2019 SKCA 89. The Court of Appeal affirmed that a real and substantial connection must exist between non-resident securities' dealers and the provincial jurisdiction in question, before such dealers are subject to securities regulation.

Background and Facts

In Saskatchewan, the Financial and Consumer Affairs Authority (the "FCAA") is tasked with administering The Securities Act, 1988 ("the Act"). Section 27(2)(a) of the Act makes it an offence to trade in securities, or hold oneself out as trading in securities, without being registered with the FCAA.

In June 2013, a Saskatchewan resident, David Evans, contacted a resident of Costa Rica, Andrew Berger, after hearing of Mr. Berger through friends who had invested through Mr. Berger and obtained good returns. Following further correspondence, Mr. Evans decided to invest $100,000 (US) in various futures contracts through a trading account held with Latin Clearing Corporation - a clearing agency based in Latin America.

Trading statements received by Mr. Evans indicated that Mr. Evans' investments were doing well. However, the relationship between Mr. Evans and Mr. Berger broke down, and resulted in Mr. Evans filing a complaint with the FCAA. The FCAA charged Mr. Berger with trading in securities without being registered with the FCAA, in contravention of the Act.

Decision of the FCAA

Prior to addressing whether Mr. Berger had contravened the Act, the Tribunal had to address whether the Act was applicable to Mr. Berger's activities at all. The Tribunal concluded that Mr. Berger's and Latin Clearing's residence outside of Saskatchewan was "not relevant when determining whether (they) acted as dealers in Saskatchewan." It reached this legal conclusion by pointing to appeal decisions which found that securities legislation is not limited to solely "intraprovincial matters."

The Jurisdictional Issue

On appeal, Mr. Berger argued that the FCAA had...