## Facts

- The federal executive referred to the Supreme Court of Canada the question whether a proposed Canadian Securities Act fell within Parliament’s legislative authority.
- Securities regulation in Canada had historically been administered by provincial and territorial regulators through partially harmonized but fragmented regimes.
- The proposed Act stated purposes of investor protection, fair and efficient capital markets, and safeguarding the integrity and stability of the financial system.
- The scheme included dealer registration, prospectus and disclosure requirements, duties for market participants, derivatives regulation, civil remedies, and regulatory/criminal offenses.
- The proposal contemplated a national regulator and an opt-in model under which provinces and territories could choose to participate.
- Provincial governments opposing the proposal argued it intruded on provincial jurisdiction over property and civil rights and local matters.
- Proponents argued the Act was valid under Parliament’s general trade and commerce power.

## Issues

1. What was the “pith and substance” (dominant characteristic) of the proposed Canadian Securities Act?
2. Did the proposed Act fall within Parliament’s general trade and commerce power under the applicable multi-factor test for national regulatory schemes?

## Decision

- The Court unanimously answered the reference question “no.”
- In pith and substance, the proposed Act was an unconstitutional intrusion into provincial jurisdiction because it primarily regulated the day-to-day securities industry within provinces.
- The Act did not qualify as valid federal legislation under the general branch of the trade and commerce power because it was not confined to matters of genuine national concern.
- The Court stated there is room for a federal role limited to genuinely national aspects of securities regulation, including systemic risk and national data collection, and left open cooperative federal–provincial approaches.

## Legal Principles

- Constitutional validity turns on pith and substance: the court identifies the law’s dominant characteristic and then classifies it under the division of powers.
- The general trade and commerce power supports broad national economic regulation only where the scheme satisfies established indicia, including that it is directed to trade as a whole rather than a particular industry.
- A regulatory scheme may fail the federal trade and commerce power analysis if it overreaches into ordinary intra-provincial regulation that provinces are competent to enact and administer.
- “Systemic risk” in capital markets may constitute a national concern where risks can produce cascading effects across the financial system, supporting a limited federal role.
- Cooperative federalism is constitutionally permissible where each level of government legislates within its assigned powers to create integrated regulation.

## Conclusion

The Court concluded the proposed Canadian Securities Act, as drafted, was unconstitutional because it largely displaced provincial authority over the routine regulation of securities markets and did not fit within Parliament’s general trade and commerce power, while recognizing that a narrower federal statute targeting systemic risk and other genuinely national dimensions could be constitutionally viable within a cooperative framework.


Reference re Securities Act, 2011 SCC 66, [2011] 3 S.C.R. 837 (Can. 2011)