Library of Parliament Publication on Proposed Federal Securities Regulator - Part 2

This is a follow-up to the Library Boy post of June 19, 2012 entitled Library of Parliament Publication on Proposed Federal Securities Regulator.

The Library of Parliament recently published the second part of its document on federal securities law, Proposed Federal Securities Regulator 2. Constitutional Aspects:

"In May 2010, as part of its proposal to create a federal securities regulator, the federal government brought to the Supreme Court of Canada the Reference re Securities Act. This was the most recent in numerous efforts over the years to study the possibility of establishing a federal securities regulator. With the stated aim 'to provide legal certainty to the provinces, territories and market participants,' the government asked the Court to make a determination on the following question: 'Is the annexed Proposed Canadian Securities Act within the legislative authority of the Parliament of Canada'?"

"In December 2011, the Supreme Court ruled that the Securities Act proposed by the government is not valid because it does not fall under any power vested in the Parliament of Canada by the Constitution."

"This publication, which analyzes the constitutional aspects of that decision, contains two parts: a summary of the Supreme Court’s opinion, and a description of some reactions to the opinion."

Library of Parliament Publication on Proposed Federal Securities Regulator

The Library of Parliament recently made available a new publication entitled Proposed Federal Securities Regulator - 1. Economic Aspects:

"Over the years, a number of interests have promoted the creation of a federal securities regulator. Others, while working towards a greater harmonization of rules, have maintained that the current system of securities regulation is preferable."

"Most recently, the federal government proposed legislation to establish a federal regulator responsible for implementing a single Canadian securities statute, and in December 2011, the Supreme Court of Canada ruled that the legislation was unconstitutional. A few months later, in the 2012 Budget, the government restated its economic arguments in support of creating a single regulator."

"This publication summarizes those economic arguments, as well as views in support of the current system. It also describes the current state of securities regulation and the actions taken by the federal government and other stakeholders regarding the proposed federal body."

Securities Regulation Reference Case Materials Available on Supreme Court of Canada Website

The Supreme Court has wrapped up its two-day hearing into the federal government's request that the Court rule on the constitutionality of proposed legislation to create a national securities regulator.

Appeal courts in Alberta and Quebec have ruled that the proposal would violate the Constitution because it would intrude on provincial powers.

The facta of all the parties and intervenors of the case are available on the Court's website. As well, the hearings were broadcast via webcast and the webcasts are archived.

The Department of Finance has posted background material on the issue, as well as links to the proposed legislation.

Earlier Library Boy posts on the subject include:

• Webcast of University of Toronto Roundtable on Creation of a National Securities Authority (February 14, 2009): "At the end of January, the University of Toronto law faculty organized a panel discussion on the creation of a national securities regulator and the report of the federally-appointed Expert Panel on Securities Regulation (...) Citing the fact that Canada is the only developed country in the world that does not have an overarching regulatory body responsible for overseeing capital markets, the Report recommended the implementation of a single, national securities regulator (...) While Ontario and British Columbia support the creation of a single regulator, Alberta and Quebec remain opposed to the Report, arguing that the current passport system is sufficient and that a single body will intrude on the constitutional right and ability of individual jurisdictions to regulate their distinct capital markets."
• Constitutional Reference to Supreme Court of Canada on Proposed Canadian Securities Act (May 27, 2010): "The Canadian government has referred its bill to create a national securities regulator to the Supreme Court of Canada for a determination as to its constitutionality (...) The Government believes that the proposed Canadian Securities Act is a valid exercise of Parliament’s jurisdiction, and will argue that position before the SCC. The Government’s position is supported by a large number of existing legal opinions by experts and constitutional scholars (...) The governments of Quebec and Alberta are furious, as they see the creation of a national securities regulator as an intrusion into the area of provincial powers."
• University of Toronto Launches Securities Law Portal (January 26, 2011): "The University of Toronto has launched a Canadian Securities Law Portal (...) These constitutional references are extremely important to the future of capital markets in Canada. Does the Parliament of Canada have legislative authority to enact the proposed Act? Why is a Canadian Securities Regulator necessary? What legal structure will ultimately govern issuers, intermediaries, self-regulatory organizations, investors and other capital market stakeholders? Would the structure proposed under the Act be effective if implemented? What are its strengths and weaknesses?"

University of Toronto Launches Securities Law Portal

The University of Toronto has launched a Canadian Securities Law Portal:

"On May 26, 2010, the Government of Canada tabled for information in Parliament the proposed Canadian Securities Act, which would establish a Canadian securities regulator. The Attorney General of Canada concurrently referred the Act to the Supreme Court of Canada asking whether the proposed Act is within the legislative authority of the Parliament of Canada."

"The Attorneys General of Alberta and Quebec have also initiated references with their respective Courts of Appeal, asking whether the proposed Act is within the legislative authority of the Parliament of Canada. The filing of evidence to each court has begun and oral arguments before the Supreme Court of Canada are set to be heard in April, 2011."

"These constitutional references are extremely important to the future of capital markets in Canada. Does the Parliament of Canada have legislative authority to enact the proposed Act? Why is a Canadian Securities Regulator necessary? What legal structure will ultimately govern issuers, intermediaries, self-regulatory organizations, investors and other capital market stakeholders? Would the structure proposed under the Act be effective if implemented? What are its strengths and weaknesses? "

The site sees itself as a gateway for debate among the various stakeholders involved in the issue of securities regulation in Canada.

Constitutional Reference to Supreme Court of Canada on Proposed Canadian Securities Act

The Canadian government has referred its bill to create a national securities regulator to the Supreme Court of Canada for a determination as to its constitutionality:

"Under section 53 of the Supreme Court Act, the Governor in Council can refer important questions of law or fact to the SCC for an opinion. The SCC will then provide an opportunity for interested parties to make written and oral arguments. After considering the question(s) and the arguments of the interested parties, the Court will render an opinion and, to the extent possible, will provide an answer to the question(s) posed by the Governor in Council (...)"

"The Government has referred the following question about the proposed Canadian Securities Act to the SCC: Is the annexed Proposed Canadian Securities Act within the legislative authority of the Parliament of Canada?"

(...)

"The Government believes that the proposed Canadian Securities Act is a valid exercise of Parliament’s jurisdiction, and will argue that position before the SCC. The Government’s position is supported by a large number of existing legal opinions by experts and constitutional scholars"

The Department of Finance has posted background material on the issue, as well as links to the proposed legislation.

Th governments of Quebec and Alberta are furious, as they see the creation of a national securities regulator as an intrusion into the area of provincial powers.

More on the controversy:

• Flaherty outlines securities watchdog plan (Canadian Broadcasting Corporation, May 26, 2010): "On Wednesday, [federal Finance minister] Flaherty said a single regulator would be better able to fight fraudsters such as Earl Jones and Vincent Lacroix, whose schemes cost investors hundreds of millions in recent years (...) If approved, the new regulatory body would oversee securities trading and serve as a financial watchdog across the country. Canada is the only country in the G20 without a national securities regulator, and Flaherty has called the current system of separate regulators an 'embarrassment' to the country."
• National securities regulator worth recalcitrant provinces’ fury (Globe and Mail, May 27, 2010): "The Canadian Securities Act that Jim Flaherty introduced Wednesday has infuriated the governments of Quebec and Alberta, who believe Ottawa is messing around in their jurisdictions. The fierce opposition that the two will put up as the legislation is reviewed by the Supreme Court and then debated in Parliament could further damage the Conservatives’ modest hopes in Quebec while simultaneously angering the Alberta base. The Tories have, in the past, alienated one constituency or the other; it is quite an accomplishment to anger both at once. Yet Canada needs a national agency to regulate capital markets. Trades cross borders – not just provincial, but national. New forms of trading are proliferating around the globe. Bank of Canada Governor Mark Carney has voiced the need for a single regulatory regime."
• Keeping up with Joneses of fraud (National Post, May 27, 2010): "There's a flow chart in the government's back-grounder for its new Canadian Securities Regulatory Authority that shows how the planned single regulator will be, in the words of Homer Simpson, 'Judge Judy and executioner.' Investigations into securities-related criminal matters that are currently handed off to police by the patchwork of provincial securities commissions will be enforced by the new super regulator. Armed with more resources, expertise and a raft of new evidence-gathering tools, this promises to be the Dirty Harry of regulators -- which may be a good thing, depending on whether you think large, vaguely unaccountable bureaucracies should be given the equivalent of a .44 Magnum (...) In his [Minister Flaherty's] view, a national regulator will add the 'pillar that's missing' to Canada's financial edifice. He suggested that cases such as the recent Earl Jones fraud scandal might have been avoided if the new regulator had been in place to protect investors (...)The blatant attempt to cast the existing Balkanized regulatory system in a poor light had the predictable consequence of infuriating Premier Jean Charest, who was in full-on Captain Quebec mode. 'To claim an event like Earl Jones would not have happened if there was a national commission is completely beside the point,' he said."
• Valeurs mobilières - L'agence unique verra le jour en 2012 - Flaherty dépose son projet de loi qui irrite le Québec [Securities - Single agency will see the light in 2012 - Flaherty introduces his bill that irritates Quebec] (Le Devoir, May 27, 2010): "Pendant que le gouvernement Harper en était hier à présenter son projet de loi sur une commission nationale des valeurs mobilières qui remplacerait ni plus ni moins les agences provinciales par un régime canadien, Québec évoquait rien de moins qu'une «invasion» du fédéral dans un de ses champs de compétence (...) La proposition fédérale met la table à un nouvel affrontement politique, car, en vertu de l'article 92 de la Constitution canadienne, le domaine des valeurs mobilières est de compétence provinciale. Le ministre Flaherty est cependant convaincu que les juges de la Cour suprême, auxquels il devait envoyer le projet de loi hier, lui donneront raison." [While the Harper government was introducing its bill to create a national securities agency that would basically replace the provincial agencies with a national scheme, Quebec was referring to nothing less than a federal invasion of one of its areas of control ... The federal proposal prepares the way for a new political clash, because, under s.92 of the Canadian Constitution, securities fall under provincial jurisdiction. Minister Flaherty, however, is convinced that the justices of the Supreme Court, to whom he would submit the bill yesterday, will agree with him. ]
  

Webcast of University of Toronto Roundtable on Creation of a National Securities Authority

At the end of January, the University of Toronto law faculty organized a panel discussion on the creation of a national securities regulator and the report of the federally-appointed Expert Panel on Securities Regulation.

The webcast of the roundtable discussion has been archived on the Faculty of Law's website:

"Last week, the Expert Panel on Securities Regulation, appointed by Finance Minister Jim Flaherty 10 months ago, released its final report. Citing the fact that Canada is the only developed country in the world that does not have an overarching regulatory body responsible for overseeing capital markets, the Report recommended the implementation of a single, national securities regulator. The new regulatory regime would be based on uniform objectives, guiding principles of regulatory conduct and a single securities Act."

"While Ontario and British Columbia support the creation of a single regulator, Alberta and Quebec remain opposed to the Report, arguing that the current passport system is sufficient and that a single body will intrude on the constitutional right and ability of individual jurisdictions to regulate their distinct capital markets. And with the Panel recommending the federal government take unilateral action to impose a new regulatory structure, following an opt-in transition period, some provinces are vowing to take the constitutional question to the Supreme Court."

Speakers included University of Toronto associate dean of law Anita Anand, law professor Jeffrey MacIntosh, business lawyer Jeremy D. Fraiberg (Toronto office of Osler, Hoskin & Harcourt LLP), and constitutional scholar Peter W. Hogg.

World Bank Doing Business Law Library

The World Bank has created Doing Business, a database of economic and regulatory indicators that are comparable across 175 economies.

The site includes a Law Library, "the largest free online collection of business laws and regulations".

For each country, one can find laws on such topics as banking and credit, bankruptcy, companies, labour, securities, taxation and trade.

Financial Services Resources for the Non-Specialist

As a follow-up to an item from earlier this week, I received news of a one-day workshop at the Faculty of Information Studies (University of Toronto) on May 6th.

The workshop will focus "on Canadian sources which are freely and/or easily available on the Internet or at a local library, although international (primarily US) and specialized, fee-based resources will also be mentioned".

The class will deal with:

• Banking
• Capital Markets (securities dealers)
• Insurance
• Asset Management (mutual funds, pensions), plus

In terms of basic financial literacy, many government agencies and financial regulators have set up "investor education" websites.

Among some of the more interesting are:

• Federal Reserve Board Education (US)
• Investor Education Fund (Canada) - funded by penalties collected by the Ontario Securities Commission
• Canadian Foundation for Investor Education
• Investor's Clearinghouse (US)
• Financial Consumer Agency of Canada (government)
• Your Money Network (Canada) - funded by the Canadian Bankers Association, but with many other private, non-profit and government partners and aimed at young people, it contains many good educational resources

Securities Law Resources to Cut Through the Fog

I attended a lunch-and-learn session at the Ontario Securities Commission (OSC) office in downtown Toronto today.

It was organized by the Toronto Association of Law Libraries (TALL) and featured OSC librarian Wendy Reynolds and Eric Leduc, librarian with the firm of Davies Ward Phillips & Vineberg LLP.

Now, securities law is not exactly my forte. The jargon can be daunting: you've got your CSA, your OSC, the IDA, along with the MFDA and the SROs, as well as the MRRS to fit all the pieces together, if you want to call exemptions, applications, blanket orders, stop orders, national instruments and multilateral instruments "pieces". And don't confuse your FASB with your CICA, or mix up SEDAR, SEDI and SOX. You do that, you never know, they might send the RS to knock on your door at 4AM. Oh, and have you met EDGAR yet? I know there's a LivEdgar. Does this mean there's a zombie-like DeadEdgar too hiding out there somewhere ready to attack and no one has told me?

Anyway...

Well, Leduc and Reynolds did point out some great print and online resources to keep the confusion to a minimum.

Send an e-mail to Eric Leduc for the list.

One interesting resource mentioned at the meeting is a Deloitte document comparing securities policy changes implemented in the US and Canada following the introduction of the Sarbanes-Oxley Act of 2002.

As the Deloitte document explains, "(T)hese changes, aimed at restoring investor confidence, broadly impact a number of stakeholders and constituencies in the marketplace, including management of public companies, public accounting firms, audit committees, and others including regulators and standard setters, investors, investment firms and analysts, and attorneys. The following table inventories various ruling activities – both in the United States and Canada – arising from the adoption of the Sarbanes-Oxley Act of 2002."