Reference Re Securities Act (Canada)

2011 ABCA 77 (Released 8 March 2011)

Constitutional Law – Division of Powers – Securities Regulation

A unanimous Reference decision of the Alberta Court of Appeal held that Parliament's proposed Securities Act ("Act") to establish a national securities regulator is unconstitutional; specifically, the five-member panel found that the proposed Act is ultra vires Parliament's authority pursuant to the Constitution Act, 1867.

Both the federal and Alberta governments agreed that the proposed Act is, in pith and substance, the regulation of the participants in the public market and transactions relating to the raising of capital. At its core, the purpose of the Act is the regulation of particular investment contracts and property. Existing case law provides that the provinces have historically regulated the securities industry within provincial jurisdiction over "property and civil rights".

The federal government argued, however, that it holds a concurrent jurisdiction in the area of securities regulation and that it is therefore also able to create valid law on the subject pursuant to the "double aspect doctrine". Any conflicting provincial legislation would then be rendered inoperable to the extent of the conflict with valid federal law on application of the paramountcy principle.

The federal government argued that the Act was valid pursuant to its authority over criminal law, and, more significantly, under the general branch of the trade and commerce power, sections 91(27) and 91(2) of the Constitution Act, 1867 respectively.

The Court of Appeal disagreed: the Act is not criminal law as the raising of capital has not traditionally been seen to be criminal and the focus on the statute is not the creation of prohibitions followed by penalties.

Further, under the general "trade and commerce" power, the Act failed to meet three of the five indicia used to assess valid law enacted under this power, as recognised by the Supreme Court of Canada in General Motors v City National Leasing ([1989] 1 SCR 641).

Of the failed indicia, the Court held that...