OTTAWA -
Canada's financial markets are not a collection of isolated local endeavours but a national and international concern that requires the broad oversight of a single regulator, the Supreme Court heard Thursday.
The top court heard from a series of groups arguing that the current patchwork system of 13 provincial and territorial regulators falls short, during the second and final day of hearings into whether Ottawa should be allowed to create a national securities regulator.
Under the current regime, one province is prevented from compelling others to follow suit when it comes to enforcing stock market rules, Janet Minor, a lawyer for the Ontario Attorney General, told the court.
"Capital markets are not a collection of local markets," said Minor, who added that Canada needs to be able to present a unified response to interprovincial and international problems.
John Laskin, a lawyer for the Investment Industry Association of Canada, argued that while there are regional differences, investors from all parts of the country invest in businesses all over the country.
"Why should it be that Ontario is the sole regulator of the Toronto Stock Exchange? The Toronto Stock Exchange is itself of national economic concern," Laskin said.
"We've grown from a situation of regional stock exchanges into a select number of national stock exchanges... the interests that those institutions affect are trans-national in nature."
However the court was critical of the argument.
"Was there an inability on the part of Canada to respond (to the recent financial crisis) that was caused by the fact that there was no single regulator at the national level?" asked Justice Rosalie Abella.
Finance Minister Jim Flaherty referred the case to the top court in the hope it will sanction the constitutionality of creating a single regulator to govern the country's capital markets.
However, several provinces are seeking to block the proposed legislation that would allow each province and territory to voluntarily opt in to a federal regulatory scheme.
In addition to Alberta and Quebec, British Columbia, Saskatchewan, Manitoba and New Brunswick are expected to present arguments that the securities markets should remain under provincial jurisdiction on Thursday.
Under the current structure, the 10 provincial and three territorial regulators co-operate through a passport system in which regulatory approvals in one province are recognized by others.
The legal issue is whether trading in securities is a matter of contractual, property and civil rights, or can be considered to come under the federal power to regulate matters of trade and commerce.
Both the Alberta and Quebec courts of appeal have rejected the federal government's proposal. The Alberta court said it has always been up to the provinces to regulate the professions, specific industries, some types of contracts and forms of property. In a split decision, the Quebec Court of Appeal pointed out that provincial jurisdiction in securities regulation has been recognized repeatedly for the last 80 years by various bodies, including the Supreme Court of Canada.
Canada is the only country in the G20 that does not have a national securities regulator.
