The Quebec Court of Appeal [officials website], Quebec's highest court, ruled [judgment, in French] Thursday that the creation of a national securities adviser, as set forth in the proposed Canadian Securities Act [text; official backgrounder], would be unconstitutional. The legislation would establish the Canadian Securities Regulatory Authority (CSRA) [fact sheet], consolidating the current "passport" system, which allows province and territory authorities to issue registration recognized nationwide, under a single national authority run by a board of directors accountable to the Ministry of Finance [official website], with voluntary provincial participation. The court's ruling echoes a similar decision handed down by the Alberta Court of Appeal [official website] in March, which stated that under the Constitution Act, 1867 [text], the federal government does not have the constitutional authority to regulate the securities industry. The legislation was submitted to the Supreme Court of Canada [official website] for an ultimate ruling on the proposal's constitutionality [official backgrounder], and the top court is scheduled to hear the case this month.
Canadian Finance Minister Jim Flaherty [official website] proposed the legislation [JURIST report] in May. The legislation is based on the recommendations of a seven-member panel appointed by Flaherty, which concluded last January that the global financial crisis [FT backgrounder] increased the need for a national securities regulatory system. It comes as a culmination of the efforts of successive Canadian governments to form a single securities regulator. To date, six provinces and territories have applied for status to oppose the federal legislation before the Supreme Court, leaving Ontario as the only province that will support the legislation.