A National Securities Regulator for Canada

16 10 2009
There was a story in the news today that reminded me of the need to update Canada’s antiquated, steam-engine age constitution. The story concerned the regulation of securities.
Toronto Stock Exchange in 1856. Image from Library and Archives Canada

Toronto Stock Exchange in 1856. Image from Library and Archives Canada

Toronto's Financial District Today

Toronto's Financial District Today

Canada has always been something of an anomaly in the sense that it is the only industrialized country without a national securities regulator. In Canada, securities and securities markets are regulated by the provinces, which is widely regarded as an arrangement that makes the country less competitive internationally.

For years, the possibility of creating a national securities regulator has been discussed, but without anything being done: Ottawa was scared that such a move would be denounced in Alberta and, of course, Quebec, as an unconstitutional assault on provincial autonomy. The federal government is now taking steps to regulate securities. It announced today that it will ask the Supreme Court to rule on the constitutionality of creating a national securities regulator. (See here, here, here, and here).

I strongly support the idea of a national securities regulator and commend the Harper government for moving on this issue. (For the record, I tend to think that unitary states are more efficient than federations. There would probably be many benefits if the provincial governments were abolished).  However, I’m a bit disturbed by the fact some commentators appear to think that the creation of a national securities regulator is a done deal. There is already lots of talk about the transition team.

Supreme Court of Canada

Supreme Court of Canada

We don’t know yet how the Supreme Court will rule on this issue or how the current SCC justices feel about the issue of centralization vs. provincial rights. If the courts say yes, Canada may have a national securities regulator within a few years, but the whole thing may be derailed by an election. Moreover, even if the courts give the green light and Ottawa passes the required legislation, Quebec, which is now recognized as a nation within Canada, will probably retain its own regulator.

Predicting how power will be distributed between the federal and provincial governments is a

John A. Macdonald, 1875. Image from Library and Archives Canada

John A. Macdonald, 1875. Image from Library and Archives Canada

tricky business. Some of our greatest statesmen have had a poor track when it came to making predictions in this field. In December 1864, when Canadians were debated whether to proceed with Confederation, John A. Macdonald that the federal constitution outlined by the Quebec Conference would soon become a unitary state.  In a letter to a conservative politician in Toronto who wanted to create a unitary state right away, Macdonald said that proposed provincial governments would not last for long. He wrote:

“If the Confederation goes on, you, if spared the ordinary age of man, will see both Local Parliaments & Governments absorbed in the General power. This is as plain to me as if I saw it accomplished but of course it does not do to adopt that point of view in discussing the subject in Lower Canada.”

Sir John A. Macdonald Papers, vol. 510 Macdonald to M.C. Cameron, 19 December 1864.

For better or worse, Macdonald’s prediction did not come to pass. Instead, the provincials governments grew so powerful that some of them began to act as if they were sovereign states. Lower Canada Quebec maintains quasi-diplomatic offices abroad, seeks representation in international bodies such as Unesco, and considers itself to be a nation, not just a province.



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