National stocks watchdog crucial: Ottawa
Securities regulator hearings begin in Supreme Court
The regulation of the Canada's capital markets is of national importance, a lawyer for the Attorney General of Canada said in his opening remarks into the constitutionality of a national securities regulator at the Supreme Court of Canada.
The country's highest court has scheduled two days of hearings into the issue.
"The fact that the subject matter of this act affects the economy as a whole is something that we say every Canadian with a pension knows, that every Canadian that lost their job in the market meltdown in 2007 and 2008 knows, that every business that needs money to grow knows," Robert Frater told the court.
"The type of comprehensive securities regulation that this act provides is not a narrow concern about securities trading."
Frater emphasized the government's plan to allow province's to opt-in to the national regulator.
Canada's Finance Minister Jim Flaherty has been pushing for a number of years for a single regulator to govern the country's financial markets.
Canada is the only country in the G20 that does not have a national securities regulator.
The provinces and territories administer the securities industry in Canada independently, although jurisdictions co-operate so that companies can file documentation approved by one province in all areas under what is called the "passport" arrangement.
Ottawa has argued the present approach is cumbersome, costly and not effective in detecting and enforcing fraud.
A national securities regulator has the support of many business groups, including the Canadian Bankers Association, and has been recommended by both the International Monetary Fund and the Organization for Economic Co-operation and Development.
But some provinces including Quebec, Alberta, and Manitoba have staunchly opposed the plan challenging the constitutionality of such a scheme.
David Tavender, a lawyer for the Alberta government, warned that the federal government could, in future, amend the legislation to make a national regulator mandatory and take over the regulation of the financial markets. "That threat is not idle," Tavender said.
Last month, Alberta Court of Appeal rejected Ottawa's plan for a national securities regulator as unconstitutional.
The court called it an "intrusion of the federal government into an area long occupied by the provincial governments."
It has always been up to the provinces to regulate the professions, specific industries, some types of contracts and forms of property, the court said.
"The division of power represents an understanding reached on the nature of Canadian federalism that should not lightly be disrupted by any one level of government or the courts," it said.
"If the Government of Canada wants a paradigm shift in the power to regulate the securities industry, the way to accomplish that is through negotiation with the provinces, not by asking the courts to reallocate the powers under the Constitution Act through a radical expansion of the trade and commerce power."
(With files from The Canadian Press)