CCMR to face court challenge in Quebec

The province is concerned that aspects of the current plan violate the federal-provincial division of powers. In particular, Quebec cites the fact that the federal plan includes a new federal law that would even apply to provinces that opt out of the plan for the CCMR, and that the federal government would have a veto within the new authority, which the province says is, “a situation that is unacceptable if the division of powers is to be respected.”

The planned court challenge was announced by a trio of Quebec provincial ministers — Stéphanie Vallée, minister of justice and attorney general of Québec; Minister of Finance Carlos Leitão; and Jean-Marc Fournier, minister responsible for Canadian Intergovernmental Affairs and the Canadian Francophonie — who cited the 2011 Supreme Court of Canada (SCC) ruling, which found that securities regulation is largely a provincial matter.

That seminal decision also indicated that it would be open to the federal government and participating provinces to come up with a co-operative model that respects provincial jurisdiction, but also allows policy-makers to deal with national issues, such as systemic risk.

The ministers stressed that the SCC decision confirmed that securities regulation essentially falls under the provincial power over property and civil rights, which Quebec has always vigorously defended.

“Regulation of securities trading is too important a matter to run the risk of its hinging, in whole or in part, on legislation whose legal basis is potentially unconstitutional,” Vallée says in a statement. “Given this new attempt by Ottawa to set up a pan-Canadian commission, Quebec needs to apply to the Court of Appeal once again.”

Prior to the SCC decision in 2011, courts in Quebec and Alberta ruled that a previous federal plan to create a national securities regulator was unconstitutional given the traditional division of powers.

“Quebec has always affirmed and defended its power over securities legislation and regulation on its territory, and we will continue to do so,” Fournier adds in the statement. “Any reform scenario aimed at compromising Quebec’s ability to regulate this important sector of economic activity will always be unacceptable. We must therefore apply to the Court of Appeal for a ruling on the constitutionality of the most recent federal plan.”

“This plan would adversely affect the maintenance of Quebec’s expertise in securities, a key sector of our economy,” adds Leitão in the statement. “Moreover, the existing harmonized and collaborative securities regulatory system, set up by the provinces and territories, has been very successful in achieving investor protection and economic development objectives.”

Earlier this year, the launch date for the CCMR was pushed back a year to the autumn of 2016 amid delays in publishing the proposed new body’s draft rules and objections to the draft legislation to create the new authority. Those rules, and revised legislation, are expected to be published this summer.