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Unofficial English Translation Québec (Procureure générale) c. Canada (Procureure générale) 2011 QCCA 591 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF QUEBEC No.: 200-09-006746-090 DATE: MARCH 31, 2011 CORAM: THE HONOURABLE J.J. MICHEL ROBERT, C.J. ANDRÉ FORGET, J.A. PIERRE J. DALPHOND, J.A. MARIE-FRANCE BICH, J.A. JEAN BOUCHARD, J.A. ATTORNEY GENERAL OF QUEBEC APPLICANT v. ATTORNEY GENERAL OF CANADA RESPONDENT and ATTORNEY GENERAL OF ALBERTA and BARREAU DU QUÉBEC and CANADIAN BANKERS ASSOCIATION INTERVENERS REFERENCE RE: POWER OF PARLIAMENT TO REGULATE SECURITIES No.: 200-09-006746-090 PAGE: 2  The Government of Quebec, by Order in Council No. 720-2010, dated August 25, 2010, pursuant to section 1 of the Court of Appeal Reference Act, R.S.Q., c. R-23, submitted the following constitutional question to this Court: [TRANSLATION] Are the provisions of the Proposed Canadian Securities Act, published by the Government of Canada on May 26, 2010, the essential purpose of which is to protect investors and regulate the securities industry, and the provisions to that effect in sections 295, 296, and 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, ultra vires the Parliament of Canada under the Constitution Act, 1867?  Answer (Robert C.J.): Yes. Except for the criminal law provisions, the proposed Act is ultra vires the legislative authority of the Parliament of Canada; however, sections 295, 296 and 297 of the Budget Implementation Act, 2009 are valid.  Answer (Forget, Bich and Bouchard JJ.A.): Yes. Except for the criminal law provisions, which are valid pursuant to subsection 91(27) of the Constitution Act, 1867, the proposed Act and section 297 of the Budget Implementation Act, 2009 are not within the legislative authority of the Parliament of Canada pursuant to subsection 97(2) of the Constitution Act, 1867.  Answer (Dalphond J.A.): No. The Parliament of Canada has jurisdiction under subsection 91(2) of the Constitution Act, 1867 to enact the entire proposed Act; as regards sections 295, 296 and 297 of the Budget Implementation Act, 2009, they are valid. [s. J.J. Michel Robert] J.J. MICHEL ROBERT C.J. [s. André Forget] ANDRÉ FORGET J.A. [s. Pierre J. Dalphond] PIERRE J. DALPHOND, J.A. [s. Marie-France Bich] MARIE-FRANCE BICH J.A. [s. Jean Bouchard] JEAN BOUCHARD J.A. No.: 200-09-006746-090 PAGE: 3 Jean-Yves Bernard Bernard, Roy For the applicant France Bonsaint Hugo Jean Direction générale des affaires juridiques et législatives (JUSTICE-QUÉBEC) For the applicant Claude Joyal René Leblanc Alexander Pless Robert Frater Joyal, Leblanc For the respondent D. Brian Foster, Q.C. E. David D. Tavender, Q.C. Jordan Milne Fraser, Milner, Casgrain For the intervener (counsel for the Attorney General of Alberta) L. Christine Enns (of the Ministry of Justice of Alberta, for the Attorney General of Alberta) Raymond Doray Mathieu Quenneville Lavery, De Billy For the intervener (Barreau du Québec) Mahmud Jamal Éric Préfontaine Osler, Hoskin, Harcourt For the intervener (Canadian Bankers Association) Date of hearing: January 17 to 20, 2011 No.: 200-09-006746-090 PAGE: 1 REASONS OF THE CHIEF JUSTICE TABLE OF CONTENTS I. PROCEDURAL BACKGROUND ................................................................................3 1. Reference by Attorney General of Quebec to Court of Appeal of Quebec ............3 2. Reference by Attorney General of Alberta to Alberta Court of Appeal ..................3 3. Reference by Attorney General of Canada to Supreme Court of Canada .............3 4. Motion to stay reference to Court of Appeal of Quebec ........................................4 II. QUESTION .................................................................................................................4 III. POSITIONS OF THE PARTIES .................................................................................6 1. Attorney General of Quebec .................................................................................6 2. Attorney General of Alberta ...................................................................................7 3. Barreau du Québec ...............................................................................................7 4. Attorney General of Canada .................................................................................9 5. Canadian Bankers Association ...........................................................................10 IV. ANALYSIS ................................................................................................................11 1. Method ................................................................................................................11 2. Pith and substance analysis ................................................................................12 a) Intrinsic evidence ...........................................................................................15 i. The proposed Act .....................................................................................15 ii. Sections of the Budget Implementation Act, 2009 ....................................22 b) Extrinsic evidence ..........................................................................................23 i. History of harmonization initiatives ...........................................................23 ii. Parliamentary statements and debates ....................................................27 iii. Expert reports ...........................................................................................28 iv. Existing provincial legislation ....................................................................33 v. Finding on pith and substance..................................................................37 3. Provincial power over property and civil rights ....................................................40 a) Historical origins ............................................................................................40 b) Provincial residual clause ..............................................................................45 c) Scope of power ..............................................................................................47 d) Finding on property and civil rights power .....................................................52 4. Federal jurisdiction over trade and commerce ....................................................53 a) Interprovincial and international trade ............................................................55 b) General jurisdiction ........................................................................................60 c) Application to this case ..................................................................................63 i. General scheme of regulation and supervision by a regulatory organization ..............................................................................................64 ii. Trade in general .......................................................................................64 No.: 200-09-006746-090 PAGE: 2 iii. Provincial inability .....................................................................................66 iv. Requirement of unanimity.........................................................................72 v. Finding on power over trade in general ....................................................73 5. Sections from the Budget Implementation Act, 2009 ..........................................73 V. CONCLUSION .........................................................................................................74 Introduction ......................................................................................................1 Preliminary Comments ....................................................................................1 Regulation of activities relating to securities is historically within the authority of two levels of government ........................................................................7 Two major trends in conflict ...........................................................................24 Authority of Parliament to enact the proposed Act .........................................27 Comments on Parts 12 and 13 ...........................................................................50 The Budget Implementation Act, 2009 ................................................................51 Final remarks .................................................................................................52 Conclusion .....................................................................................................54 No.: 200-09-006746-090 PAGE: 3 I. PROCEDURAL BACKGROUND 1. Reference by Attorney General of Quebec to Court of Appeal of Quebec  On July 8, 2009, the Government of Quebec, by Order in Council No. 869-2009,1 referred three constitutional questions to this Court for an opinion pursuant to the Court of Appeal Reference Act.2 These questions concerned a federal government initiative to establish a federal securities regulation commission.  On May 26, 2010, the Government of Canada published a proposed Securities Act (hereafter ―proposed Act‖). In reaction, the Government of Quebec, by Order in Council 720-2010, amended the questions referred to this Court, so that the reference contained only one question.3 2. Reference by Attorney General of Alberta to Alberta Court of Appeal  On January 26, 2010, pursuant to the Judicature Act,4 the Lieutenant Governor in Council of Alberta, by Order in Council No. 20-2010, referred two constitutional questions to the Alberta Court of Appeal regarding the legislative authority of the government of that province to enact a law that would oust the application of the Securities Act5 in certain circumstances. In reaction to the publication of the proposed Act, the Lieutenant Governor in Council amended the questions by Order in Council No. 181-2010, dated June 9, 2010, to make reference to the proposed Act. 3. Reference by Attorney General of Canada to Supreme Court of Canada  On May 26, 2010, the day the proposed Act was published, the Government of Canada referred to the Supreme Court of Canada, by Order in Council P.C. 2010-667, the question of whether the proposed Act is within the legislative authority of the 1 Government of Quebec Order in Council No. 869-2009 ―Concernant un renvoi à la Cour d'appel relatif à la compétence du Parlement du Canada en matière de valeurs mobilières‖ [concerning a reference to the Court of Appeal respecting the legislative authority of the Parliament of Canada over securities] dated July 8, 2009, A.G.Q., p. 1. 2 Court of Appeal Reference Act, R.S.Q., c. R-23. 3 Order in Council No. 720-2010 ―Concernant une modification au décret no 869-2009 du 8 juillet 2009 concernant un renvoi à la Cour d‘appel relatif à la compétence du Parlement du Canada en matière de valeurs mobilières‖ [concerning an amendment to Order in Council No. 869-2009 dated July 8, 2009, concerning a reference to the Court of Appeal respecting the legislative authority of the Parliament of Canada over securities], Factum of the AGQ, p. 71. 4 Judicature Act, R.S.A. 2000, c. J-2, s. 26. 5 Securities Act, R.S.A. 2000, c. S-4. No.: 200-09-006746-090 PAGE: 4 Parliament of Canada and gave notice to all provinces and territories in accordance with the Supreme Court Act.6 The attorneys general of the provinces of Ontario, Quebec, Nova Scotia, New Brunswick, Manitoba, British Columbia, Saskatchewan, and Alberta were granted intervener status in that proceeding, which is scheduled to be heard on April 13 and 14, 2011. 4. Motion to stay reference to Court of Appeal of Quebec  On January 22, 2010, the Attorney General of Canada (hereafter ―AGC‖) asked this Court to temporarily stay proceedings in this reference until June 20, 2010, a date near the week marking the end of the session of Parliament. The AGC argued that the reference was premature, interfered in the political and legislative processes, threatened the judicial independence of the Court, and would be an unreasonable burden on the Court‘s resources. A panel of this Court (Robert C.J. and Bich and Léger JJ.A.) dismissed that motion in a judgment delivered from the Bench on March 26, 2010.7 II. QUESTION  The questions initially submitted by the Government of Quebec were the following: [TRANSLATION] 1. Do the provisions proposed in the Draft Securities Act annexed to the Final Report of the Expert Panel on Securities Regulation, January 2009, the essential purpose of which is to protect investors and regulate the securities industry, and the provisions pertaining thereto at sections 295, 296 and 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, exceed the legislative authority of the Parliament of Canada pursuant to the Constitution Act, 1867? 2. Does the Parliament of Canada have legislative authority pursuant to the Constitution Act, 1867 to enact legislation allowing issuers and registrants to voluntarily submit to a federal securities act to the exclusion of provincial legislation, as proposed in the Final Report of the Expert Panel on Securities Regulation, January 2009? 3. Does the Parliament of Canada have legislative authority pursuant to the Constitution Act, 1867 to enact legislation stipulating that provincial securities 6 Supreme Court Act, R.S.C., 1985, c. S-26, s. 53. 7 Québec (Procureure générale) v. Canada (Procureure générale), 2010 QCCA 636. No.: 200-09-006746-090 PAGE: 5 acts are inapplicable, as proposed in the Final Report of the Expert Panel on Securities Regulation, January 2009?  By a second order in council, the Government of Quebec replaced these questions with a single question, as follows: [TRANSLATION] Are the provisions of the Proposed Canadian Securities Act, published by the Government of Canada on May 26, 2010, the essential purpose of which is to protect investors and regulate the securities industry, and the provisions to that effect in sections 295, 296 and 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, ultra vires the Parliament of Canada under the Constitution Act, 1867?  In my view, this Court enjoys some discretion in answering this question. For example, it should be noted that the question characterizes the purpose of the proposed Act as being to protect investors and regulate the securities industry. This characterization is by no means binding on us. Similarly, I think it would be acceptable to conclude that some of the provisions of the proposed Act are within the jurisdiction of Parliament while others are not, even though the question concerns the proposed Act as a whole.  This approach is consistent with this Court‘s discretion, pursuant to its appellate jurisdiction, to rephrase questions of law raised by the parties. The Legislature intended to transpose this discretion to our reference jurisdiction, under section 5 of the Court of Appeal Reference Act: 5. The court shall send to the Government for its information its opinion duly certified upon the questions so referred, giving its reasons in support thereof, in like manner as in the case of judgments rendered upon appeals brought before the said court. [Emphasis added.]  This approach is also consistent with the fundamental role of the courts under the distribution of powers, which role is to act as ―ultimate umpire of the federal system‖ and requires, as Chief Justice Dickson noted in The Queen v. Beauregard, that it be autonomous and completely independent of government.8 Finally, the Reference re Secession of Quebec established that appellate courts have discretion to refuse to answer reference questions if they are not directed to legal issues, or for pragmatic reasons.9 The importance of the courts‘ autonomy and independence as umpires of federalism and the discretion of appellate courts not to answer reference questions are indicative of the need for this Court to exercise discretion in assessing a reference. This 8 The Queen v. Beauregard,  2 S.C.R. 56 at para. 27. 9 Reference re Secession of Quebec,  2 S.C.R. 217 at paras 27–31. No.: 200-09-006746-090 PAGE: 6 discretion should, at the very least, allow the Court to define the questions on which its opinion is sought as it sees fit, without being strictly bound by the terms of the question submitted. III. POSITIONS OF THE PARTIES 1. Attorney General of Quebec  The Attorney General of Quebec (hereafter ―AGQ‖) proposes that the pith and substance of the proposed Act be characterized as the protection of investors in the securities market through the supervision of intermediaries and the imposition on issuers of duties to disclose. The AGQ argues that this sphere of activity has always been recognized as being within the exclusive powers of the provinces in relation to property and civil rights and matters of a merely local nature, pursuant to subsections 92(13) and 92(16) of the Constitution Act, 1867.10 In the view of the AGQ, the securities trade is still, generally speaking, a series of intraprovincial transactions, despite the revolution in information technology and the globalization of stock exchanges which occurred in recent decades.  The AGQ also submits that the pith and substance of the proposed Act is not within the federal trade and commerce power under subsection 91(2) of the Constitution Act, 1867. The AGQ argues that the proposed Act does not meet three of the five indicia established by the Supreme Court in General Motors of Canada Ltd. v. City National Leasing11 and Kirkbi AG v. Gestions Ritvik Inc.12  More specifically, the AGQ is of the opinion that the proposed Act does not concern trade as a whole, but one industry in particular. In this sense, securities regulation is more akin to the regulation of insurance, manufacturing, the oil industry, professional bodies or consumer protection than to the regulation of business corporations or competition. Further, the AGQ argues that the proposed Act is not of such nature that the provinces, jointly or severally, would be constitutionally unable to enact it. In this regard, the AGQ submits that the current system is considered to be one of the best in the world in terms of regulation. The AGQ adds that the objective of reducing systemic risks to the financial system cannot be used to otherwise characterize the pith and substance of the proposed Act, since the pursuit of this objective is not its dominant characteristic. Finally, the AGQ argues that the proposed Act‘s application will not be compromised by the failure of one or more province or locality to opt in and notes that the proposed Act 10 Constitution Act, 1867 (U.K.), 30 & 31 Vict., c. 3, reproduced in R.S.C. 1985, App. II, No. 5. 11 General Motors of Canada Ltd. v. City National Leasing,  1 S.C.R. 641. (hereafter ―General Motors‖). 12 Kirkbi AG v. Gestions Ritvik Inc.,  3 S.C.R. 302, 2005 SCC 65 (hereafter ―Kirkbi‖). No.: 200-09-006746-090 PAGE: 7 itself contemplates the possibility that certain provinces may not take part in the scheme.  Finally, we note that the AGQ considers sections 295, 296 and 297 of the Budget Implementation Act, 200913 to be invalid by their inseverability, since they are ancillary to the proposed Act and share its pith and substance. 2. Attorney General of Alberta  The Attorney General of Alberta (hereafter ―AGA‖) proposes a broader characterization of the pith and substance of the proposed Act than does the AGQ. In the AGA‘s view, the pith and substance of the proposed Act is to regulate the securities trade to protect investors, ensure a fair market, prevent systemic risks, and foster interprovincial and international cooperation among securities authorities.  The AGA submits that such an act falls within the provinces‘ property and civil rights power since it essentially deals with transactions of a local nature between provincially registered intermediaries. The fact that some issuers or registrants are located outside the province would only have an incidental effect on interprovincial or international trade and would not change the pith and substance of the proposed Act.  The AGA argues that the strictness of the evaluation of Parliament‘s ability to enact the proposed Act pursuant to its general trade and commerce power must reflect the magnitude of the possible intrusion into provincial jurisdiction. In the present case, the AGA submits that recognizing a federal power in respect of this subject matter would open the floodgates, draining the property and civil rights power of its content and upsetting the balance of federalism by condemning other subject matters, such as insurance, consumer protection, or the regulation of professionals, to the same fate.  Finally, the AGA raises the three indicia set out in General Motors and Kirkbi. The AGA argues that the proposed Act does not concern trade as a whole and that case law and authors frequently make use of the expression ―securities industry‖. Regarding the provincial inability indicium, the AGA submits that the provinces have clearly demonstrated that under the Constitution, they may validly regulate this industry by harmonizing their laws. The AGA argues that, on its face, the proposed Act fails the unanimous participation indicium, since it provides for a voluntary opt-in mechanism. 3. Barreau du Québec  The Barreau du Québec (hereafter ―Barreau‖) submits that it is intervening because of the issues of legal and institutional consistency raised by this reference, particularly with regard to Quebec civil law. The Barreau argues that the proposed Act 13 Budget Implementation Act, 2009, S.C. 2009, c 2. No.: 200-09-006746-090 PAGE: 8 threatens the unique nature of Quebec‘s economy and thus the principle of cooperative federalism.  The Barreau submits that the pith and substance of the proposed Act falls within the provincial property and civil rights power. It argues that case law has systematically treated the protection of the public as part of this power, as are the creation of property rights, the characteristics of such rights, and their exchange by contract. Section 9 of the proposed Act, entitled ―Purposes of Act‖, is more of a ploy to provide a constitutional justification for Parliament‘s legislative action than it is a reflection of the Act‘s pith and substance. The Barreau submits that the proposed Act pursues macroeconomic regulation objectives through the same means as those currently used by the provinces.  The Barreau adds that [TRANSLATION] ―the security of the financial system‖ is not a subject matter under the Constitution because it was not explicitly assigned by the Constitution Act, 1867 and lacks the required singleness to be assigned to Parliament by default. It is alleged that recognizing such a power would allow the federal government to regulate any supplier of financial goods and services, such as credit unions and companies in the fields of insurance, credit, or real estate.  For reasons similar to those of the AGQ and the AGA, the Barreau submits that the proposed Act does not meet the last three indicia set out in Kirkbi for finding legislation to be within Parliament‘s general trade and commerce power. It argues that the securities industry shares a large number of similarities with the insurance industry, which is recognized as being within provincial jurisdiction. It adds that Parliament does not have the required authority to enact the proposed Act under the double aspect doctrine or pursuant to its interprovincial and international trade power.  Furthermore, the Barreau submits that a negative response to the reference question would go against the principle of cooperative federalism developed by the Supreme Court, the fundamental objectives of which are to reconcile unity with diversity, promote democratic participation at the local and regional levels, and foster cooperation among governments for the common good. The Barreau argues that the recognition of federal jurisdiction to enact the proposed Act would represent a shift toward a centralist form of federalism and go against predictability in the division of powers. It would also allow the provinces to renounce their legislative powers and delegate them to the federal government, contrary to the principles established in Attorney General of Nova Scotia v. Attorney General of Canada.14  Finally, the Barreau submits that the sections creating criminal offences and those in the Budget Implementation Act, 2009 are ancillary to the proposed Act and must also be declared invalid. 14 Attorney General of Nova Scotia v. Attorney General of Canada,  S.C.R. 31, 49. No.: 200-09-006746-090 PAGE: 9 4. Attorney General of Canada  The AGC submits that the determination of the pith and substance of the proposed Act rests on a very general assessment of the objectives sought and the desired effects. In this case, the AGC defines the pith and substance as the betterment of the economic well-being of Canada as a whole through the introduction of a comprehensive regulatory regime for capital markets. The AGC submits that the proposed Act, although similar to provincial legislation, has a different pith and substance, since it is more comprehensive and does not pursue the same purpose. The AGC notes that the efficacy of the proposed measure is not a relevant factor.  The AGC argues that the fact that the courts have recognized the provinces‘ jurisdiction in respect of various aspects of the securities trade, as was the case in Multiple Access Ltd. v. McCutcheon15 and Global Securities Corp. v. British Columbia (Securities Commission),16 does not oust the jurisdiction of the federal government. The AGC states that the proposed Act falls within the general trade and commerce power granted to Parliament by subsection 91(2) of the Constitution Act, 1867, and may be enacted under the double aspect doctrine.  The AGC analyzes the indicia set out by the Supreme Court in General Motors and repeated in Kirkbi in respect of the scope of the trade and commerce power, noting that these indicia are not exhaustive. As a preliminary remark, the AGC notes that a presumption of constitutionality applies in this case and that meeting the standard of proof consists in establishing a rational basis for the impugned statutory power, rather than rigorously proving all the facts alleged.  Regarding the first indicium, the AGC submits that the proposed Act would set up a comprehensive regulatory system to discourage trade practices that are harmful to Canada‘s economy. This would bring securities in line with the other essential components of Canada‘s financial system—banks, interest and insolvency—which are all primarily within federal jurisdiction. The AGC further argues that the Canadian Securities Regulatory Authority (hereafter ―Authority‖) meets the second indicium.  The AGC contends that the proposed Act, as its Preamble indicates, is sufficiently national and general in nature to meet the third indicium, since capital markets are a key element of economic infrastructure. Securities regulation, by imposing standards on all publicly traded business corporations regardless of which industry they operate in, is more than a particular industry.  The AGC further submits that the provinces are constitutionally incapable of enacting securities regulation legislation and gives various examples illustrating this 15 Multiple Access Ltd. v. McCutcheon,  2 S.C.R. 161 (hereafter ―Multiple Access‖). 16 Global Securities Corp. v. British Columbia (Securities Commission),  1 S.C.R. 494, 2000 SCC 21 (hereafter ―Global Securities‖). No.: 200-09-006746-090 PAGE: 10 point. Many transactions are interprovincial or international in scope since sellers, buyers, and intermediaries may be located in different provinces. The AGC argues that the provinces‘ ancillary power to regulate securities is not without limits. The AGC adds that the territoriality principle prevents provincial securities authorities from imposing their decisions in another province, or investors from seeking redress in provinces other than the one where the securities were issued. Furthermore, the AGC submits that a provincial authority‘s jurisdiction over federally incorporated business corporations is limited, making action by a federal authority necessary. The AGC argues that the provinces do not have the required authority to enact criminal law provisions and that a province cannot represent Canada and defend Canada‘s interests in international forums, such as the International Organization of Securities Commissions (hereafter ―IOSCO‖). The AGC concludes its arguments regarding this indicium by submitting that the passport system has a number of shortcomings demonstrating the inherent limitations of provincial cooperation in securities regulation.  Finally, the AGC submits that although all provinces need to opt into the proposed system, their membership in it is not mandatory. A lack of unanimity could lead to inconsistent rules, uncoordinated enforcement, and varying levels of investor protection. According to the AGC, the proposed Act reflects a flexible cooperative federalism and is intended to be implemented gradually. This indicium should be assessed on the basis of the objective of unanimous participation, rather the resulting efficacy if unanimity is not achieved. 5. Canadian Bankers Association  The Canadian Bankers Association (hereafter ―CBA‖), which represents 51 banks, claims intervener status as one of the most important participants in capital markets. It submits the securities regulation system in Canada is unable to carry out its role in the face of the profound changes that the market has experienced.  It proposes five interpretative principles to guide this Court in its deliberations. First, it submits that the Constitution Act, 1867 must be interpreted in an evolutionary manner, taking into account current commercial realities. Further, like the AGC, the CBA submits that a presumption of constitutionality applies to the proposed Act, that the burden of proof consists in showing a rational basis, and that the Court does not have to consider the proposed Act‘s efficacy. Finally, it argues that, in accordance with the principle of flexible federalism, this Court should favour the double aspect doctrine over the interjurisdictional immunity doctrine.  The CBA submits that the proposed Act falls within Parliament‘s general trade and commerce power and meets the five indicia established in General Motors and Kirkbi. Regarding the third indicium, it adds that although the case law uses the expression ―securities industry‖, the proposed Act does not regulate a single industry, but rather the raising of capital in all industries and sectors in Canada‘s economy. No.: 200-09-006746-090 PAGE: 11 Turning to the fourth indicium, the CBA submits that the provinces cannot make laws in relation to interprovincial or international trade or property and civil rights outside their borders, establish a national regulatory body empowered to represent the country at the international level, integrate securities regulation into the broader regulatory framework for Canada‘s financial system, or enact criminal penalties. The CBA adds that the efficacy of the federal system would be diminished if the proposed Act were limited to the interprovincial and international aspects of the securities trade since securities transactions would have unequal protection across the country, and the management of urgent matters such as the prevention of systemic risks would be too slow. Finally, the CBA submits that the voluntary participation of the provinces does not undermine compliance with the fifth indicium. Parliament‘s intention is to create a single system, and the validity of the proposed Act is not dependent on the whether the provinces choose to opt in. IV. ANALYSIS 1. Method  In the recent Reference re Assisted Human Reproduction Act, the Supreme Court confirmed the two-step method for determining whether an act is within the legislative authority of Parliament or that of the provincial legislatures. 17 First, the pith and substance of the act must be established. Second, the act must be classified in accordance with the subject matters listed in sections 91 and 92 of the Constitution Act, 1867. The question submitted by the AGQ will be answered in the negative if the proposed Act could be validly enacted by Parliament.  It is possible that a provision of a piece of legislation enacted by one level of government could have ancillary effects on a field of jurisdiction of another. For this reason, the interjurisdictional immunity doctrine must be interpreted as allowing a fair amount of overlap.18 Long ago, the Privy Council recognized that the enumerated classes of matters in the Constitution Act, 1867 are not watertight compartments.19 Where the constitutional validity of a particular provision is challenged, the courts must determine whether that provision is sufficiently integrated into a validly enacted law to be constitutional.20 As Chief Justice Dickson wrote in General Motors, this requires 17 Reference re Assisted Human Reproduction Act, 2010 SCC 61 at para. 19. See also Peter Hogg, Constitutional Law of Canada, (Toronto: Carswell, 2009), 15-6 (hereafter ―Hogg‖) and Henri Brun, Guy Tremblay & Eugénie Brouillet, Droit constitutionnel, 5th ed., (Cowansville: Yvon Blais, 2008), 448–449 (hereafter ―Brun, Tremblay and Brouillet‖). 18 OPSEU v. Ontario (Attorney General),  2 S.C.R. 2 at para. 27. 19 Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96 (P.C.), 107–108. (hereafter ―Parsons‖). See also Reference re Employment Insurance Act (Can.), ss. 22 and 23,  2 S.C.R. 669, 2005 SCC 56 at para. 8. 20 Global Securities, supra, footnote 16 at para. 19, Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture),  2 S.C.R. 146, 2002 SCC 31 at para. 41 (hereafter ―Kitkatla No.: 200-09-006746-090 PAGE: 12 considering the seriousness of the encroachment, with a considerable encroachment requiring a stricter assessment of its degree of integration.21  Finally, it is possible that two near-identical pieces of legislation could be validly enacted by two levels of government, according to the double aspect doctrine. In such cases, one same piece of legislation must pursue two different objectives connecting it with two different matters. The Supreme Court, quoting Lederman, stated in Multiple Access that this doctrine should be applied where the contrast between the relative importance of the two aspects is not so sharp.22 To take a frequently cited example, both Parliament and the legislatures have enacted laws against impaired driving. On the one hand, provincial provisions are aimed at reducing accidents, injuries, and deaths related to impaired driving; on the other hand, the purpose of the relevant Criminal Code provisions is to punish offenders and curtail a social evil.  The expression ―notwithstanding anything in this Act‖ in section 91 of the Constitution Act, 1867 has been interpreted as meaning that, in cases of conflict, federal law is of paramount authority23 and that a provincial law is invalid insofar as it is incompatible with federal law.24 Thus, we may conclude that both the federal government and provincial governments could validly enact the proposed Act, in which case the reference question would have to be answered in the negative. 2. Pith and substance analysis  Great care must be taken in identifying the pith and substance of an act, since this will have a determinative effect on the ensuing classification. The parties propose very different characterizations of the pith and substance of the proposed Act. Detractors of the proposed Act give it a relatively narrow reading. In the AGQ‘s view, it deals with the protection of investors in the securities market through the supervision of intermediaries and the imposition on issuers of duties to disclose. In the AGA‘s view, it deals with the regulation of the securities trade to protect investors and market fairness, prevent systemic risks, and foster interprovincial and international cooperation among securities authorities. In the Barreau‘s view, the proposed Act creates a comprehensive regulatory regime for a provincial area of activity, the contracts related thereto, and all participants therein.  For the proposed Act‘s defenders, its pith and substance is more comprehensive. In the AGC‘s view, the pith and substance here is the betterment of the economic well- being of Canada as a whole through the introduction of a comprehensive regulatory Band‖), Kirkbi, supra, footnote 12 at para. 20, MacDonald et al. v. Vapor Canada Ltd.,  2 S.C.R. 134, 158–159 (hereafter ―Vapor Canada‖). 21 General Motors, supra, footnote 11 at para. 47. 22 Multiple Access, supra, footnote 15 at paras 181–182. 23 Tennant v. Union Bank of Canada,  A.C. 31, 45. 24 Ontario Liquor License Case (Re),  A.C. 348, 367. No.: 200-09-006746-090 PAGE: 13 regime for capital markets. Finally, although this is more a statement of the proposed Act‘s objective than of its pith and substance, the CBA submits that the proposed Act is aimed at protecting and improving the integrity and competitiveness of capital markets, which affects the prosperity and well-being of all Canadians.  The synonyms used by Justice La Forest help to define the scope of the term ―pith and substance‖, which plays a key and determinative role in constitutional matters: There is, of course, no magic in the phrase. . . . It can be described as the "constitutional value represented by the challenged legislation", as "an abstract of the statute's content", and as "the true meaning of the challenged legislation" or the "leading feature" or "true nature and character" of the impugned law . . . . Whatever the phrase used, the idea remains the same: division of powers analysis commences with an identification of "the dominant or most important characteristic of the challenged law" . . . .25  To assess the pith and substance of a law, case law asks us to examine both the purpose of the enacting body and the legal effect of the law. 26 The AGC, citing Ward v. Canada (Attorney General),27 submits that the purpose must be of prime importance in the analysis of a law‘s pith and substance. Professors Patrick J. Monahan and André Tremblay agree that the purpose of a law must take precedence over its effects. They add, however, that the effects must still be considered and that, where the effects depart markedly from the stated objective, it must be concluded that the law was enacted for another purpose.28 In such cases where a government seeks to do indirectly what it cannot do directly, by means of what is called ―colourability‖, the law will be declared unconstitutional.29  I am of the view that the purpose and effects of a law must be analyzed on an equal footing to determine a law‘s pith and substance. It is possible that some essential effects of a statute are not disclosed by the statement of its purpose or, conversely, that some of the effects sought are not achieved. The three opinions given in the recent Reference re Assisted Human Reproduction Act confirm this approach.30 That said, the AGC and the CBA rightly argue that a law‘s efficacy in meeting its objectives is not a valid consideration in the pith and substance analysis. Rather, such a consideration is relevant to the political question of whether enacting the law was appropriate.31 25 Whitbread v. Walley,  3 S.C.R. 1273, 1286. 26 Reference re Firearms Act (Can.),  1 S.C.R. 783 at para. 16. 27 Ward v. Canada (Attorney General),  1 S.C.R. 569, 2002 SCC 17, 580 (hereafter ―Ward‖). 28 Patrick J. Monahan, Constitutional Law, 3d ed., (Toronto: Irwin Law Inc., 2006), 115. André Tremblay Droit constitutionnel, Principes, 2d ed., (Montréal: Thémis, 2000), 316. 29 Reference re Upper Churchill Water Rights Reversion Act,  1 S.C.R. 297, 330–331. 30 Reference re Assisted Human Reproduction Act, supra, footnote 17 at paras 22, 189, and 284. 31 Reference re Firearms Act (Can.),  1 S.C.R. 783, 2000 SCC 31 at para. 57. No.: 200-09-006746-090 PAGE: 14  The AGC also argues that the pith and substance of the proposed Act must be given a very general definition. Justices LeBel and Deschamps explicitly rejected this approach in Reference re Assisted Human Reproduction Act, noting that an overly general definition might result in connecting a law with two exclusive powers of a single level of government and legitimizing the overflow of ancillary effects. They wrote: It is important to identify the pith and substance of the impugned provisions as precisely as possible. . . . If vague characterizations of the pith and substance of provisions were accepted, this could lead not only to the dilution of and confusion with respect to the constitutional doctrines that have been developed over the years, but also to an erosion of the scope of provincial powers as a result of the federal paramountcy doctrine.32  The AGC and the CBA submit that the constitutionality of the proposed Act is presumed. This presumption was stated in, among other cases, Re The Farm Products Marketing Act, in which Justice Fauteux wrote the following: There is a presumptio juris as to the existence of the bona fide intention of a legislative body to confine itself to its own sphere and a presumption of similar nature that general words in a statute are not intended to extend its operation beyond the territorial authority of the Legislature.33 Without calling into question the good faith of the federal Minister of Finance, I find that the presumption of constitutionality should not apply in this case, since the proposed Act is not the product of a legislative body, but of the executive. Not only has it not received Royal Sanction, a fundamental distinction, but it has also not been debated and passed by members of the House of Commons and the Senate.  As Professor Peter W. Hogg sums it up, in its assessment of the purpose and effect of an act, a court may refer to intrinsic material (preamble, section stating the purpose, other sections, etc.) and extrinsic material regarding the context in which the act was drafted (reports of commissions of inquiry, white papers, scientific studies, parliamentary commission report, parliamentary debates, and so on).34 Ward established that identifying the problem that the government decided to address may be relevant to identifying an act‘s pith and substance.35  Before proceeding with such an analysis, it is important to identify the burden of proof applicable to the considerable number of expert testimonies that were given regarding the pith and substance of the proposed Act and its classification among the enumerated subject matters. The AGC and the CBA submit that this Court should not 32 Ibid. at para. 190. 33 Re The Farm Products Marketing Act,  S.C.R. 198, 255. 34 RJR-MacDonald Inc. v. Canada (Attorney General),  3 S.C.R. 199 at para. 30; Global Securities, supra, footnote 16 at para. 25. 35 Ward, supra, footnote 27 at paras 22–23. No.: 200-09-006746-090 PAGE: 15 require strict evidence of the facts alleged in support of the proposed Act‘s validity, nor should it rule on issues of social or economic policy. They add that, in accordance with the words of Chief Justice Laskin in Re Anti-Inflation Act, the extrinsic material should instead serve to establish a ―rational basis‖ connecting the proposed Act to the head of power invoked.36 The CBA refers us to the following words of Hogg, who proposes that this approach allows contradictory pieces of evidence to be considered without having to rule on each of them and that, once a rational basis has been established, the act is presumed to be constitutional: The rational basis test . . . erects a presumption of constitutionality that is exceedingly difficult for the challenger of legislation to overcome. The rational basis test enables a court to uphold the validity of legislation without the necessity for strict proof of the underlying facts. It enables a court to resolve conflicting evidence without the need to make a definitive ruling on the conflict.37  The AGC and the CBA rightly state that the standards of proof used ―as a matter of fact‖, in the words of Chief Justice Laskin,38 do no apply in this reference proceeding. Since we have not heard the experts, we cannot assess their credibility, rule on objections, or determine the truth of the facts alleged. A more generous reception and a less strict assessment of the evidence are therefore appropriate.  My analysis will not, however, endow the proposed Act with a presumption of constitutionality. The rational basis test is appropriate for considering highly political questions, such as when assessing a national crisis in the context of Parliament‘s general residual power in respect of emergencies. Such is also the case where impugned statutory provisions are connected with the principal legislative power invoked in support of a law,39 and perhaps in other circumstances as well. However, the indicia established by the case law on the general trade and commerce power call for an assessment of complex factual evidence, not policy choices, which a presumption of validity would make impossible. I would therefore require that the arguments made by all of the parties in this case be considered on the balance of probabilities, in accordance with the approach taken in Kitkatla Band.40 a) Intrinsic evidence i. The proposed Act  I will begin the analysis of the intrinsic material relating to the proposed Act with the elements stating the Act‘s purpose. The Preamble reads as follows: 36 Re: Anti-Inflation Act,  2 S.C.R. 373, 423 (hereafter ―Re: Anti-Inflation Act‖). 37 Hogg, supra, footnote 17 at 60-17. 38 Re: Anti-Inflation Act, supra, footnote 36 at 423. 39 Multiple Access, supra, footnote 15 at 183. 40 Kitkatla Band, supra, footnote 20 at para. 46. No.: 200-09-006746-090 PAGE: 16 Whereas: Attendu : Capital markets affect the well-being Que les marchés des capitaux touchent le and prosperity of all Canadians; bien-être et la prospérité de tous les Canadiens; Capital markets are increasingly Que les marchés des capitaux prennent national and international in scope; une ampleur nationale et internationale accrue; Capital markets are rapidly evolving Que les marchés des capitaux évoluent and include increasingly complex rapidement et comportent des produits financial products and methods of financiers et des méthodes de placement distribution and trading; et de négociation de plus en plus complexes; It is important for Canada to have Qu‘il est primordial pour le Canada d‘avoir competitive capital markets and a des marchés des capitaux compétitifs et strengthened, comprehensive and assujettis à un régime de contrôle coordinated enforcement regime for d‘application de la loi renforcé, complet et those markets; coordonné; It is in the national interest to effectively Qu‘il est dans l‘intérêt national de protect and promote Canadian protéger et de promouvoir efficacement interests internationally, including les intérêts du Canada à l‘étranger, through the development of consistent notamment par l‘élaboration d‘orientations regulatory policies for capital markets; cohérentes en matière de réglementation des marchés des capitaux; The integrity and stability of Canada‘s Que la présence, au sein du régime financial system would be enhanced by réglementaire canadien du secteur the presence of a single Canadian financier, d‘un seul organisme canadien securities regulator as part of the de réglementation des valeurs mobilières Canadian financial regulatory rehausserait l‘intégrité et la stabilité du framework; système financier du Canada; Parliament intends to create a single Que le Parlement entend créer un tel Canadian securities regulator, organisme, encadré par un régime supported by a comprehensive législatif et réglementaire complet qui statutory and regulatory regime that s‘applique dans l‘ensemble du Canada; applies across Canada; and Parliament chooses to do so through a Que le Parlement choisit de le faire au process under which the regime will apply moyen d‘un processus au titre duquel le as willing provinces and territories opt in; régime s‘appliquera au fur et à mesure que les provinces et territoires intéressés y adhéreront, No.: 200-09-006746-090 PAGE: 17  The purposes of the proposed Act and the guiding principles for the Authority‘s activities are defined as follows: Purposes of Act Objet de la loi 9. The purposes of this Act are 9. La présente loi a pour objet de : (a) to provide protection to investors a) Protéger les investisseurs contre les from unfair, improper or fraudulent pratiques déloyales, irrégulières ou practices; frauduleuses; (b) to foster fair, efficient and b) Favoriser des marchés des capitaux competitive capital markets in which justes, efficaces et compétitifs en the public has confidence; and lesquels le public a confiance; (c) to contribute, as part of the Canadian c) Contribuer, dans le cadre du régime financial regulatory framework, to the réglementaire des finances du Canada, integrity and stability of the financial à l‘intégrité et à la stabilité du système system. financier. Principles Principes 16. (1) In pursuing the purposes of this 16. (1) Dans la réalisation de l‘objet de la Act, the Authority must have regard to présente loi, l‘Autorité tient compte des the following principles: principes suivants : (a) the administration of this Act should a) l‘exécution de la présente loi devrait be open, efficient, flexible and se faire de façon ouverte, efficiente et responsive; souple; (b) the interests of investors and b) les intérêts des investisseurs et businesses in all sectors and regions entreprises des différents secteurs et across Canada should be taken into régions du Canada devraient être pris account; and en compte; (c) the cost of compliance with this Act c) les coûts liés au respect de la should be commensurate with the présente loi devraient être appropriés, regulatory outcomes sought to be compte tenu de l‘importance des achieved. résultats à atteindre en matière de réglementation. Means Moyens (2) The primary means for achieving the purposes of this Act include (2) Les principaux moyens de réaliser l‘objet de la présente loi sont (a) requirements for timely, accurate and notamment : efficient disclosure of information; a) des exigences concernant la No.: 200-09-006746-090 PAGE: 18 (b) prohibitions of unfair, improper or communication de l‘information en fraudulent market practices; temps opportun et avec exactitude et efficience; (c) standards for honest and responsible conduct by market participants; b) des interdictions visant les pratiques déloyales, irrégulières ou frauduleuses (d) the monitoring and evaluation of du marché; issues or developments affecting the integrity or stability of capital markets; c) des normes touchant le comportement and honnête et responsable des participants du marché; (e) cooperation and coordination among financial authorities, in Canada and d) la surveillance et l‘évaluation des elsewhere. questions et faits nouveaux touchant l‘intégrité ou la stabilité des marchés des capitaux; e) la coopération et la coordination entre les autorités financières, au Canada et à l‘étranger.  The proposed regime may be described as follows. Part 1 proposes the creation of a Council of Ministers, composed of the federal Minister of Finance and a member of the executive council of each province, to facilitate the administration of the proposed Act and the exchange of information on securities regulation. Part 2 establishes the Authority, which has two divisions and is responsible for administering the proposed Act. The Regulatory Division is led by the Chief Regulator, whose powers are described further on. The second division is the Canadian Securities Tribunal (hereafter ―Tribunal‖). The Tribunal is independent of the Regulatory Division 41 and has the powers of a superior court of record with respect to the attendance, swearing and examination of witnesses, and the production and inspection of documents.42 The Chief Adjudicator is responsible for the performance of the Tribunal‘s adjudicative functions and for its direction and management.43  Part 2 establishes the Regulatory Policy Forum, consisting of the chairperson of the Authority‘s board of directors, the Chief Regulator, the Deputy Chief Regulators, the Chief Adjudicator, the Associate Chief Adjudicators, and any other directors of the Authority that are designated for that purpose by the chairperson. Its mandate is to participate in the consideration and development of the Authority‘s regulations, policies, practices, and activities; also, to obtain the views of participants in the capital market on the Authority‘s regulations, policies, practices, and activities. The members of the 41 Proposed Act, A.G.C., p. 1, s. 28. 42 Ibid., s. 39. 43 Ibid., s. 36. No.: 200-09-006746-090 PAGE: 19 Council of Ministers and a representative of the investor advisory panel must be invited to at least three of its meetings.44 The investor advisory panel consists of persons with experience with issues relevant to the securities market.45  Under Part 3, the Chief Regulator of the Regulatory Division may make an order recognizing a person as a self-regulatory organization, an exchange, a clearing agency, or an auditor oversight organization.46 He or she may authorize a recognized self- regulatory organization to exercise the powers or perform the duties over a dealer, adviser, or investment fund manager.47 He or she may make any decision respecting a recognized entity‘s by-laws, regulatory instruments, policies, procedures, or practices, the manner in which it carries on business, its trading of securities, or its listing or posting of securities on a recognized exchange.48  Under Part 4, the Chief Regulator may make an order designating a person as a credit rating organization, an investor compensation fund, a dispute resolution service, an information processor, a trade repository, or any other entity that provides investors or market participants with prescribed services.49  Part 5 prohibits persons from acting as a dealer, adviser, or investment fund manager unless they are registered with the Authority.50 The Chief Regulator may suspend registration in the case of non-compliance with the proposed Act.51 Part 6 prohibits persons from distributing securities unless a prospectus has been filed with the Chief Regulator. A prospectus must comply with the disclosure requirements for securities issued or proposed to be distributed.52 In the case of non-compliance, the Chief Regulator may order that trading activities cease.53 Part 7 prohibits persons from trading in exchange-traded derivatives unless the exchange is recognized by the Chief Regulator54 and the prescribed disclosure document has been accepted by the Chief Regulator.55  Part 8 imposes on reporting issuers the requirement to provide periodic and timely disclosure of their business and affairs, including financial statements. 56 It also requires insiders of reporting issuers to file reports disclosing their beneficial ownership 44 Ibid., s. 50. 45 Ibid., s. 51. 46 Ibid., s. 64. 47 Ibid., s. 67. 48 Ibid., s. 71. 49 Ibid., s. 73. 50 Ibid., s. 76. 51 Ibid., ss. 78–79. 52 Ibid., s. 82. 53 Ibid., ss. 86–87. 54 Ibid., s. 89. 55 Ibid., s. 90. 56 Ibid., s. 93. No.: 200-09-006746-090 PAGE: 20 of securities of the issuer and their interest in any related financial instrument of a security of the issuer.57  Part 9 regulates take-over bids and issuer bids, including the offeror‘s obligation to send to all relevant security holders a circular that sets out the terms of the bid. In the case of non-compliance with the proposed Act, any interested person may apply to a court for compensation for damages suffered, rescission of the transaction, or an order to dispose of securities acquired.58  Part 10 imposes record-keeping standards on market participants and prescribes a duty to deal fairly, honestly, and in good faith. It prohibits insider trading and unfair practice.59  Part 11 authorizes the Chief Regulator to review the business and conduct of a recognized entity or designated entity.60 This involves issuing orders summoning persons to appear, compelling persons to give evidence on oath, compelling persons to produce records,61 or authorizing designated persons to enter a place for the purpose of the inquiry.62 It authorizes the Tribunal to order that a person comply with the proposed Act, that trading and purchasing cease in respect of any security, that a director or officer of an issuer resign, that a person be prohibited from becoming a registrant, or that a market participant be enjoined from making changes to its practices, disseminating or not disseminating information, or amending disseminated information.63 In the case of non-compliance, the Tribunal may order a person to pay to the Authority an administrative penalty of no more than $1 million for each contravention.64 The Tribunal may also order that all trading in a security cease for a period of not longer than 15 business days if the Tribunal considers that there are unexplained and unusual fluctuations in the volume of trading in the security.65  A certified copy of a decision made by the Tribunal may be filed with a court. 66 The Chief Regulator may apply to a court for a declaration that a person has not complied with or is not complying with the proposed Act or for any order to rectify the situation.67 57 Ibid., s. 97. 58 Ibid., s. 108. 59 Ibid., ss. 117 and 121. 60 Ibid., s. 133. 61 Ibid., s. 134(3). 62 Ibid., s. 134(7). 63 Ibid., s. 139. 64 Ibid., s. 140. 65 Ibid., s. 144. 66 Ibid., s. 145. 67 Ibid., s. 146. No.: 200-09-006746-090 PAGE: 21  The proposed Act authorizes a peace officer to make an ex parte application to a judge or justice for an order that an entity disclose the names of all registrants that purchased or traded a specified security, or that a registrant disclose the names of all persons on whose behalf the registrant made such transactions, 68 as well as any required record or information.69  Part 11 creates offences on summary conviction and on proceedings by way of indictment for contraventions of provisions of the proposed Act, which are punishable by imprisonment for a term of not more than five years less a day or a fine of not more than $5 million.70 It also creates a series of criminal offences with respect to misleading acts relating to a security.71  Part 12 governs civil liability. An issuer or a director of an issuer may be liable for damages to a person who has purchased securities offered by a prospectus that contains a misrepresentation.72 An offeror or the director of an offeror may be liable for damages to a person to whom a take-over bid circular or issuer bid circular containing a misrepresentation has been sent.73 An issuer or the director of an issuer may be liable for damages to a person who has purchased securities offered by a prescribed offering document that contains a misrepresentation.74 A purchaser of a security to whom a prospectus or amendment was not sent, a person to whom a take-over bid circular, issuer bid circular, or notice of change or variation to either of them was not sent, or a purchaser of a security to whom a prescribed offering document was not sent has a right of action for damages.75 In all such cases, the person bringing an action may also apply to have the transaction rescinded.  Part 12 also provides that a person who engages in insider trading may be liable for damages to a person who purchases or trades a security of that issuer. 76 Finally, it provides that various other contracts involving the purchase or trade of securities may be rescinded in certain circumstances.77 Defences and limitation periods are provided for the various actions that may be brought under this part.  Part 13 governs civil liability for secondary market disclosure. An issuer or the director of an issuer may be liable for damages to a person who acquires a security offered in a document or public oral statement containing a misrepresentation.78 The 68 Ibid., s. 149. 69 Ibid., s. 150. 70 Ibid., s. 153. 71 Ibid., ss. 158 et seq. 72 Ibid., s. 169. 73 Ibid., s. 171. 74 Ibid., s. 173. 75 Ibid., s. 179. 76 Ibid., s. 180. 77 Ibid., ss. 187–190. 78 Ibid., ss. 196–198. No.: 200-09-006746-090 PAGE: 22 same is true for the acquisition of securities following a failure to disclose a material change.79 Part 13 provides rules for the calculation of damages, rules of procedure, and periods of limitation for such actions.  Part 14 authorizes the Authority to make regulations for carrying out the purposes and provisions of the proposed Act.80 The Authority may make a regulation only with the consent of the Minister of Finance.81 The Governor in Council may make an order requiring the Authority to make, amend, or repeal a regulation if it is of the opinion that there is an urgent need for such a measure and that, without it, there is a substantial risk of material harm to investors or to the integrity of capital markets.82 It also authorizes a court to make orders relating to the taking of evidence from a witness outside Canada.83  Finally, Part 15 provides that, upon request, the Governor in Council may designate a province as a participating province84 and make regulations respecting the transition from the participating province‘s existing regime to the Canadian regime.85 ii. Sections of the Budget Implementation Act, 2009  Section 295 of the Budget Implementation Act, 2009 authorizes the Minister of Finance to make direct payments, in an aggregate amount not exceeding $150 million, to the provinces and territories for matters relating to the establishment of a Canadian securities regulation regime and a Canadian regulatory authority. Section 296 authorizes the Minister to enter into any agreement respecting securities regulation with any province or territory. Section 297 enacts the Canadian Securities Regulation Regime Transition Office Act (hereafter the ―Transition Office‖).86  This statute establishes the Transition Office and, within it, an advisory committee consisting of not more than 13 members recommended by the participating provinces and territories.87 The Transition Office must develop a transition plan for a national regime with respect to administrative and organizational matters, consult with stakeholders, including Canadian capital market participants, and undertake any other activity that the Minister may direct.88 Unless the Governor in Council sets a different 79 Ibid., s. 199. 80 Ibid., s. 227. 81 Ibid., s. 230. 82 Ibid., s. 232. 83 Ibid., ss. 248–249. 84 Ibid., s. 250. 85 Ibid., s. 255. 86 Canadian Securities Regulation Regime Transition Office Act, S.C. 2009, c. 2, s. 297. 87 Ibid., s. 5. 88 Ibid., s 11. No.: 200-09-006746-090 PAGE: 23 date of dissolution, the Transition Office is dissolved three years after its establishment.89 b) Extrinsic evidence i. History of harmonization initiatives  The debate regarding the unification of Canadian securities regulation regimes is not new. As the ACG noted in its factum, the idea of a national securities commission was briefly raised in the 1935 Report of the Royal Commission on Price Spreads. In 1964, the Report of the Royal Commission on Banking and Finance concluded that uniform regulation was desirable and recommended the creation of a federal commission as an eleventh regulator, setting high standards that could be emulated by the provinces. The Commission wrote the following: In time, the federal agency might open regional offices to facilitate its operations, especially if some of the provincial governments found it practical and desirable to delegate at least some of their responsibilities to the federal body. While our recommendation therefore requires the establishment of an eleventh regulatory body in the first instance, it is our hope that it will eventually lead to agreement and co-operation which will eliminate much of the existing duplication and lack of uniformity. This might be achieved quickly, especially if high federal standards lead provincial governments to clear automatically issues which have been federally registered. This would give the provincial administrators more time to deal with local matters such as the licensing of security dealers and their salesmen and the registration of issues to be offered only within their own province.90  In 1967, the Ontario Securities Commission proposed the establishment of a single national regulatory body exercising jurisdiction on the basis of delegated authority from the provinces. This was justified on two bases: first, the cost of securities regimes in some provinces is disproportionate to the volume of exchanges and second, the interprovincial nature of the exchanges exceeds provincial jurisdiction.91  A 1969 report by the Study Committee on Financial Institutions in Quebec noted the flaws inherent in a fragmented regulatory system. It recommended the creation of an agency similar to that proposed by the Ontario Securities Commission, in order to 89 Ibid., s. 17. 90 Report of the Royal Commission on Banking and Finance, Porter Report, Chapter 17 (1964), 396, A.G.C. at 479. 91 Ontario Securities Commission, CANSEC Legal and Administrative Concepts, Bulletin 61, November 1967, 63, A.G.C. at 491. No.: 200-09-006746-090 PAGE: 24 [TRANSLATION] ―create a uniform adjudication process and centralize fraud detection services while respecting provincial jurisdiction to oversee institutions.‖92  In 1979, the federal Department of Consumer and Corporate Affairs produced a study called Proposals for a Securities Markets Law for Canada93 and recommended the creation of a national securities commission working in cooperation with provincial commissions, with the provincial and national commissioners delegating powers to one another.94  In 1994, the premiers of New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland proposed to the federal government a memorandum of agreement regarding the establishment of a federal securities regulator.95 The objective set out in the preamble was to increase the efficiency of capital markets by implementing a uniform securities regime, without altering the division of powers between levels of government. The federal statute would govern the extraprovincial aspects of the securities industry. The Canadian Securities Commission thereby created would be responsible for administering the act and exercising any authority delegated to it by provincial legislation.96 This proposal was echoed in the 1996 Speech from the Throne, in which the federal government stated that it was prepared to work with interested provinces toward the development of a Canadian Securities Commission.97  As the AGA has noted, the Canadian Securities Administrators (hereafter the ―CSA‖), a forum for the 10 provincial and 3 territorial administrators, have also contributed to cooperation and harmonization efforts. In 1999, they established the Mutual Reliance Review System, implemented by Canadian Policy Statements 12-201 (Mutual Reliance Review System for Exemptive Relief Applications) and 43-201 (Mutual Reliance Review System for Prospectuses and Annual Information Forms). This enables provincial and territorial administrators to rely on analyses and investigations made by another administrator in respect of a market participant. The result of this agreement is that, while each administrator continues to make decisions about participants, the latter only have to deal with one of the administrators to have documents approved, obtain exemptions, or register as an intermediary.98 92 Report of the Study Committee on Financial Institutions Quebec, Government of Quebec, Parizeau Report, 1969, 156. A.G.C. at 1080. 93 Proposals for a Securities Markets Law for Canada, A.G.C. at 508. 94 A. Douglas Harris, A Symposium on Canadian Securities Regulation: Harmonization or Nationalization? University of Toronto Capital Markets Institute, 2002, AGC Book of Authorities, Vol. 5, 85–86. 95 Ibid. at 91. 96 Draft Memorandum of Understanding Regarding the Regulation of Securities in Canada (1994), s. 3, A.G.C. at 518. 97 Debates of the House of Commons, Vol. 133, No. 001, 2nd session, 35th Parliament, February 27, 1996, 5. 98 Affidavit of William S. Rice, A.G.C., Vol. I, 29–31 at paras 100–107. (―Rice‖) No.: 200-09-006746-090 PAGE: 25  Along the same lines as the Mutual Reliance Review System, the CSA, with the exception of Ontario, signed the Provincial/Territorial Memorandum of Understanding Regarding Securities Regulation in 2004, which led to the implementation of the Multilateral Instrument 11-102 Passport System.99 The process is intended to simplify procedures for filing documents and applying for exemptions or registration as an intermediary between the various administrators. The decisions of a primary regulator, which is the province in which the head office of an issuer or the office of an individual is located, automatically apply to the other authorities. Ontario has retained its own procedures, but the other CSA members recognize its decisions automatically.  The Joint Forum of Financial Market Regulators was also founded in 1999 by the CSA, the Canadian Council of Insurance Regulators and the Canadian Association of Pension Supervisory Authorities. Its objective is to ensure the coordination of information relating to these three financial sectors and the implementation of joint regulatory and consumer protection projects.100  In 2003, the ―Wise Persons‘ Committee‖, established by the Minister of Finance, published a report entitled It’s Time.101 Breaking with earlier initiatives, it recommended the creation of an exhaustive national securities regulator to be run by a single national commission. According to the Committee, such an agency would be able to address the following difficulties with a system of intergovernmental cooperation: The passport system‘s strengths are single regulator contact, local presence and relative ease of implementation. Despite these strengths, each of which is included in the recommended model, the passport system contains significant weaknesses. It does not constitute a sufficient improvement in enforcement. Policy development would continue to suffer from the need to forge a consensus among multiple regulators with differing priorities and approaches. It would do little to enhance Canada‘s international capital markets credibility. Needless duplication would continue to exist as the passport system would maintain the current multiplicity of regulators. Issuers would continue to pay fees in all jurisdictions even though only one would serve as the primary regulator. Finally, the passport system does not, by itself, improve accountability or governance.102  In 2005, a panel commissioned by the Government of Ontario issued its report. The Crawford Panel recommended that a single regulatory regime be established by having each province adopt a single provincial statute by reference.103 99 Memorandum of Understanding Regarding Securities Regulation (2004), A.G.C. at 146. 100 Rice, supra, footnote 98, A.G.C., 37 at para. 113. 101 Committee to Review the Structure of Securities Regulation in Canada (―Wise Persons‘ Committee‖), It’s Time, (2003), vii–xi, A.G.C at 578–582. 102 Ibid., x, A.G.C. at 581. 103 Crawford Panel on a Single Canadian Securities Regulator, Blueprint for a Canadian Securities Commission, (2006), 1–11, A.G.C. at 645–655. No.: 200-09-006746-090 PAGE: 26  In 2009, the Third-Party Expert Panel on Securities Regulation, formed by the federal government, presented its report.104 The Hockin Report identified the following flaws in the existing regime. The likelihood of successfully obtaining redress for fraud in the form of compensation varies from province to province. 105 Ontario‘s refusal to participate in the passport system accentuates this problem. Moreover, the system is not very accessible given the large number of regulatory and self-regulatory agencies. The existing system is slow and costly, and its decentralized nature does not provide adequate protection against systemic risk.  The Hockin Report recommends, among other things, that the reduction of systemic risk be a guiding principle of the regulatory system, that a single, uniform performance measurement system be developed for securities regulation in Canada, that a more principles-based approach be developed with a view to reducing regulatory uncertainty, that the securities regulator retain jurisdiction over certain discretionary decisions, that a Capital Markets Oversight Office be established that would report to the federal Minister of Finance, and that the regulation of exchange-traded derivatives be prescribed in securities legislation.106  The Hockin Report was accompanied by a draft Securities Act.107 It noted that, in addition to implementing improvements, the draft legislation constituted a synthesis of the existing provincial securities regulation statutes, particularly the Securities Act108 of Alberta.109  In 2009, the Transition Office was established with the coming into force of the Canadian Securities Regulation Regime Transition Office Act on July 13, 2009. According to the transition plan submitted on July 12, 2010, the proposed Act would be enacted by December 2011, after the reference to the Supreme Court, and the Authority would launch its operations on July 1, 2012.110  This historical overview reveals a persistent desire to fight the redundancy and lack of uniformity among the Canadian regimes in order to make the system as a whole more efficient and fair. It also reveals a willingness to respect the geographic diversity of Canadian institutions and provincial jurisdiction in these matters. In 2009, in the wake of the global financial crisis precipitated by the reckless securitization of mortgages and 104 Expert Panel on Securities Regulation, Final Report and Recommendations (―Hockin Report‖), 2009, A.G.C. at 746. 105 Ibid. at 786. 106 Ibid. at 842–845. 107 Expert Panel on Securities Regulation, Draft Securities Act, Comments, P.P.G.Q. at 559. For the wording of the Act, see Draft Securities Act, http://www.expertpanel.ca/eng/reports/final-report/draft- securities-act.html. 108 Securities Act, R.S.A. 2000, c. S-4. 109 Expert Panel on Securities Regulation, Draft Securities Act, Comments, A.G.C. at 561. 110 Transition Plan for the Canadian Securities Regulation Authority, Canadian Securities Transition Office, July 12, 2010, http://www.pdac.ca/pdac/advocacy/securities/1007-summary-transition-plan-csra.pdf. No.: 200-09-006746-090 PAGE: 27 the non-bank asset-backed commercial paper crisis in Canada in 2007,111 a further objective arose, that of tackling the systemic risk threatening the financial sector. ii. Parliamentary statements and debates  The proposed Act has not been debated in the House of Commons. However, the following excerpt from a press release from the Minister of Finance sheds light on the objectives pursued: Reflecting the Government‘s willingness to work collaboratively with provinces and territories, this is a voluntary regime, which enables provinces and territories to opt in at their choice. . . . ―Canadians, who rely on capital markets for their savings and retirement plans, deserve the protection of strong regulation that reaches all parts of our country,‖ said the Honourable Jim Flaherty, Minister of Finance. ―The proposed Act we have released today brings us closer to the regime that markets demand and that Canadian investors need.‖ As Canada‘s performance during the global financial crisis demonstrated, our financial regulatory regime is a sound model for other countries. However, Canada is the only major industrialized country that lacks a national securities regulator. Our financial system can be strengthened by the establishment of a national securities regulator to oversee Canada‘s capital markets. This step will strengthen the stability, integrity and effectiveness of the Canadian financial system. . . . The proposed Canadian Securities Act is built on provincial securities regulation and harmonizes existing legislation in the form of a single statute. It benefits from the work of the Expert Panel on Securities Regulation (the Hockin Panel) and other reform efforts, and reflects domestic and international best practices. It proposes significant improvements in terms of governance, adjudication, financial stability, and regulatory and criminal enforcement, and provides a wide scope of authority to regulate financial instruments and participants in capital markets.112 [Emphasis added.]  The following speech made by the Minister of Finance in the House of Commons when the 2009 budget was passed highlights the objectives of reducing uncertainty and increasing efficiency: 111 Frank Milne, The Impact of Innovation and Evolution on the Regulation of Capital Markets, May 19, 2010, A.G.C. at 258–270. (―Milne‖) 112 Government of Canada Moves to Protect Canadian Investors, Department of Finance Canada, Ottawa, May 26, 2010, 2010-051, http://www.fin.gc.ca/n10/10-051-eng.asp. No.: 200-09-006746-090 PAGE: 28 For all its strengths, Canada's financial system does have one glaring weakness. Our patchwork system of 13 securities regulators spread across the provinces and territories causes uncertainty for investors and unnecessary red tape. In Canada's economic action plan, our government is providing a solution. Following the recommendations of the expert panel, chaired by the hon. Tom Hockin, we will establish an office to manage the transition to a Canadian securities regulator. Later this year, we will table a federal securities act for Canada and the transition office will deliver an administrative plan within 12 months. We will respect constitutional jurisdiction and participation in the Canadian securities regulator will be voluntary. For those provinces, territories and companies that choose to participate, it will sharpen our competitive edge. It will put Canadians in a better position to seize new opportunities as the global economy begins to recover.113 [Emphasis added.] iii. Expert reports  The parties submitted ample expert evidence on securities industry regulation. It should be noted that I refer to it here for the purpose of determining the objectives and effects of the proposed Act rather than whether it should be adopted or not.  The conclusions set out in Professor Frank Milne‘s report are essentially the following: most Canadians are investors in securities markets, either by means of shares purchases or indirectly through pooled investment funds; the securities market has acquired national and international dimensions that call for international cooperation on regulatory issues; the instruments traded on the securities markets are increasingly complex; the distinction between the various traditional financial activities (banking, insurance and stock market activities) has become blurred; improved coordination between those activities is necessary; the traditional distinction between equity, debt, and credit instruments has also been blurred by securitization, and; the financial crises have illustrated deficiencies in existing securities regulations.114 On the national market scale, he notes that, for example, in 2002, two thirds of some 7,600 reporting issuers in Canada were regulated by more than one provincial authority and 31% of issuers registered on the Toronto Stock Exchange or the TSX Venture Exchange were issuers regulated by the 10 provincial authorities; approximately 80% of the companies in the National Registration System Database are registered in more than one province or 113 Hon. Jim Flaherty (Minister of Finance of Canada, House of Commons, 40th Parliament, 2nd session, Tuesday, January 27, 2009). 114 Milne, supra, footnote 111, A.G.C. at 270. No.: 200-09-006746-090 PAGE: 29 territory, and; in 2008, 193 Canadian issuers were listed on a stock exchange in the United States.115  Professor Michael J. Trebilcock summarizes as follows the limits of the harmonization reached by the current passport system. His opinion is that, in such a system, the provinces are unlikely to agree to delegate their regulatory functions to a principal regulator; the consensus-based decision-making process is longer and vulnerable at any moment to a province‘s withdrawal; standards are less harmonized (particularly for derivatives and exempt markets); standards enforcement may vary from one province to the next and create a situation of regulatory competition leading to a race to the bottom; the fees to be paid are ―likely‖ to be higher because of the greater number of regulators, and; the system does not deal with interprovincial enforcement problems, fails to promote transparency and accountability, impedes Canada from speaking with a single voice at international fora, and hinders coordination with other financial system participants, such as the Bank of Canada, the Office of the Superintendent of Financial Institutions, and the banks.116 He adds that a single regulator ―will in all likelihood be more flexible and expeditious in developing new policies to meet emerging challenges in capital markets‖ than the CSA.117 Although he points out that the current system cannot be called a ―disaster‖,118 Trebilcock is of the opinion that it fails to live up to its billing as a decentralized and flexible system.119  Dr. Marion G. Wroebel filed a report on behalf of the CBA setting out two principal theses.120 First, she argues that the Canadian economy has reached national and international proportions, particularly on account of the national influence of chartered banks and of the national scale of initial public offerings. In 2009, 61% of investments were made by six bank-owned dealers, and by 2010, the banks‘ interest in pooled investment funds had exceeded 40%.121 It follows that the fragmented securities regulatory system is unable to effectively achieve its objectives of access to capital and investor protection. For example, self-regulatory agencies and exempt market brokers are subject to different rules.122 She contends that the International Monetary Fund and the Organisation for Economic Co-operation and Development (OECD) have repeatedly stated that a national Canadian system would be more efficient, which contradicts an OECD discussion paper by ranking Canada second for its securities regulatory 115 Ibid. at 234–236. 116 Michael J. Trebilcock (National Securities Regulator Report), May 20, 2010, A.G.C. at 366–369. (―Trebilcock‖) 117 Ibid., A.G.C. at 370–372. 118 Michael J. Trebilcock (Report in reply to Quebec and Alberta Experts), August 23, 2010, A.G.C. at 413. 119 Ibid. at 428. 120 Marion G. Wrobel, Report of Canadian Bankers Association Regarding Parliament‘s Jurisdiction to Create a National Securities Regulator, August 26, 2010, C.B.A. at 9. 121 Ibid. at 17. 122 Ibid. at 19. No.: 200-09-006746-090 PAGE: 30 system.123 Wroebel also notes that the globalization of markets increases the systemic risk they face. This situation requires national and international uniformity, coordination, and cooperation, which the ―Heads of Agencies‖, composed, among others, of the four largest securities commissions, are unable to achieve.124 In her opinion, a single system is necessary to give Canada a single coherent voice at international fora.  Professor Stéphane Rousseau‘s opinion is that, although there is room for improvement in the provincial framework, it has not been established that regulatory centralization would yield better results. Over the past century, the CSA has developed many practices to simplify procedures, reduce costs and facilitate participants‘ access to information: the Mutual Reliance Review System, the System for Electronic Document Analysis and Retrieval (better known as ―SEDAR‖), the System for Electronic Disclosure by Insiders, the National Registration System Database, the National Registration System and the passport system.125 Rousseau concluded that the current pan-Canadian framework is highly harmonized, allows for costs to be reduced, addresses local and regional particularities, permits experimentation and innovation, is able to respond to contemporary issues and meets IOSCO‘s Objectives and Principles of Securities Regulation.126  Professors Jean-Marc Suret and Cécile Carpentier are of the opinion that the Canadian securities regulatory system is structurally well adapted. In their view, the Canadian market is particularly local, since over two thirds of Canadian issuers are unable to be listed on United States exchanges because of their small capitalization.127 The authors state that the regulatory cost in Canada is lower than in Australia or the United Kingdom when calculated by millions of dollars of capitalization, and lower than in Australia, the United Kingdom, and the United States when calculated by company. They add that it is not an attribute of our regulatory structure that Canadian companies gain value when they become listed on a United States exchange, a phenomenon designated as the ―Canada discount‖. Instead, this is the result of an increase in demand for the security. A single system would result in a 50% increase in regulatory costs.128 Suret and Carpentier acknowledge that systemic risk prevention is necessarily a concern for securities regulatory authorities. However, they are of the opinion that the Canadian system is not particularly vulnerable to systemic risk and that the recent financial crises cannot be used to draw conclusions on the regulatory structure. 129 Last, the authors warn against the greater risk of regulatory capture in a decentralized 123 Ibid. at 21. 124 Ibid. at 25. 125 Stéphane Rousseau, L‘encadrement du secteur des valeurs mobilières par le Québec et le débat sur une commission nationale des valeurs mobilières [Quebec‘s regulation of the securities sector and the national securities commission debate], June 2010, A.G.Q. at 972–978. (―Rousseau‖) 126 Ibid. at 1205–1209. 127 Ibid. at 1239–1240. 128 Ibid. at 1240–1241. 129 Ibid. at 1243. No.: 200-09-006746-090 PAGE: 31 system, particularly in light of the high concentration of banking, financial, and self-regulated sectors.130  Professor Stephen Choi‘s conclusions are the following. The Canadian system is efficient, resilient, and allows for innovation, as shown by the low cost of access to capital and Quebec‘s creation of the Bureau de décision et de révision en valeurs mobilières, or securities decision and review office, (hereafter ―BDRVM‖) an independent administrative tribunal for the regulatory authority from which the proposed Act draws inspiration. The current system gives Canadian interests effective international representation, as shown by the efforts of the United States Securities and Exchange Commission (hereafter ―SEC‖) to reach agreements with Canada and the June 2010 cooperation agreement between the SEC, the Autorité des marchés financiers du Québec, or financial market authority, (hereafter ―AMF‖) and the Ontario Securities Commission. Choi adds that systemic risks must be prevented through the use of macro-economic instruments, such as the prudential frameworks developed by the Bank of Canada and the Office of the Superintendent of Financial Institutions Canada. Securities authorities also contribute to systemic risk protection by rigorously carrying out their mandate to protect market participants (information disclosure, licensing, credit ratings, etc.). Provincial authorities are in a better position than a national commission to intervene in this way on a micro-economic scale and prevent systemic risks. What is essential is the sharing of information between provincial authorities and prudential regulators, which the CSA currently carries out. Choi is of the opinion that a national commission would have diminished access to market feedback and be at greater risk of errors, complacency and regulatory capture. To conclude, he emphasizes that if only some provinces were to adhere to the proposed Act and the passport system were not renewed, the Canadian system would face increased costs and greater fragmentation of the underpinning law. 131  Professor Jonathan Macey‘s view is that the centralization of the Canadian system through some or all provinces‘ joining the regime under the proposed Act would have a negative impact. He reaches the opposite conclusion: that it has not been established that a decentralized system favours the race to the bottom. The United States example does not show a tendency by market participants to opt for systems that are less strict. The most recent financial crisis has shown that decentralized organizations ensure more efficient securities regulation than do centralized agencies. Time and again, the SEC neglected to investigate major frauds, and most of the investigations in the United States were conducted at state level. Macey adds that the conception of a national securities market is artificial. Local markets have two important characteristics that national and global markets do not. First, even for a share sold internationally, prices are determined at the local level because that is where firm-specific information is gathered and processed. Next, because non-public 130 Ibid. at 1244. 131 Stephen Choi, The Benefits of Provincial Securities Regulation in Canada, June 2010, A.G.Q. at 1424–1429. (―Choi‖) No.: 200-09-006746-090 PAGE: 32 information about a firm is generated locally, the greatest need for surveillance is at the local level. Global markets complement local markets because they provide access to foreign sources of capital. Conversely, the importance of national markets has not been established, and nothing warrants regulation at this level rather than at the local level. This reality is illustrated by the European Union, where regulation is conducted by member states.132  Andrea M. Corcoran is of the opinion that the Canadian and Quebec systems comply with IOSCO‘s 30 principles and three general objectives of investor protection; the establishment of fair, efficient, and transparent markets, and; systemic risk reduction. New principles particular to this last objective were adopted in 2010. 133 Since the AMF is an IOSCO member, these principles apply in Quebec. They do not prescribe a particular regulatory structure and specifically recognize that establishing a single regulator is not necessary.134 The principles infer that cooperation between many participants is necessary to ensure the system‘s efficiency. Corcoran concludes by emphasizing that both the International Monetary Fund and the World Bank considered the Canadian regulatory system efficient.135  Professor Thomas J. Courchene is of the opinion that Canada is the most decentralized federation among all of the world‘s developed countries. He adds that Canadian programs under decentralized management, such as securities regulation, are more dynamic, efficient, and innovative than if they were centralized. Securities regulation also involves a socio-political dimension. For Quebec, this involves maintaining a model of community capitalism characterized by the French language, Quebec culture, and the use of Quebec civil law. For Alberta, it involves retaining control over the key aspects of its economy, including natural resources, despite its limited political and electoral power within the country. Courchene concludes that it has not been proven that a national commission would improve the securities industry‘s performance, either nationally or internationally. It would be inappropriate for the federal government to use the current enforcement problems under the current system to justify its approach when it could address those problems in other ways. It is unlikely that a national system would be more efficient since it would have to preserve the vast majority of existing jobs. Courchene concludes that Canadians would be better served by keeping the existing system in place.136  Eric Spink, Q.C., is of the opinion that securities regulation is a component of property and contract law. Its objectives are investor protection, the establishment of fair 132 Jonathan Macey, An Analysis of the Canadian Federal Government‘s Initiative to Create a National Securities Regulator, June 2010, A.G.Q. at 1661–1666. 133 Andrea Corcoran, International Standards Affecting Securities Regulators and Regulation as Applicable to Quebec, June 2010, A.G.Q. at 1684–1985. (―Corcoran‖) 134 Ibid. at 1687. 135 Ibid. at 1898. 136 Thomas Courchene, A Single National Securities Regulator? Public Policy and Political Economy Perspectives, June 26, 2010, A.G.A. at 288–290. No.: 200-09-006746-090 PAGE: 33 markets, and systemic risk reduction. Alberta‘s Securities Transfer Act codifies the rules of contract law applicable to securities transactions. What is commonly called interprovincial securities trade is in fact a series of contracts that do not involve the displacement of property. Systemic risk reduction is achieved through the regulation of involved intermediaries and the contract rules established by clearing agencies.137 iv. Existing provincial legislation  The CBA is correct in arguing that the constitutionality of a federal statute must be determined without heed to a nearly identical provincial statute. Redundancy is not an indicator of invalidity since, as I mentioned, two statutes may be adopted to deal with different aspects of the same thing. Chief Justice Dickson expressed that view in General Motors,138 reiterating the statements he had previously made in Multiple Access.139 However, the other existing enactments dealing with the same problem may be relevant at the stage of identifying the statute‘s true character, or pith and substance, since they provide clues as to the purpose of the proposed Act and its possible effects. This section will therefore address the legislative framework applicable in Quebec in this subject-matter.  The AMF is established by the Act respecting the autorité des marchés financiers.140 As set out under Title 1, the AMF‘s mission is to provide assistance to consumers of financial products and services (hereafter in this section ―consumers‖), ensure that the regulated entities of the financial sector comply with the solvency standards ensuring consumer protection, administer eligibility to distribute financial products and services on the stock market, supervise stock market activities, and provide for consumer compensation.141 Its objectives are to foster public confidence in financial institutions, promote the availability of high-quality products and services, establish a regulatory framework fostering the development of the financial sector, provide reliable information on the financial market, and protect consumers.142 Title II provides for the establishment of a Conseil consultatif de régie administrative, or advisory board, within the AMF, composed of seven members appointed by the Quebec Minister of Finance and mandated to make recommendations to the AMF and the Minister of Finance concerning the AMF‘s operations.143  Under Title III, the AMF may recognize persons as self-regulatory organizations for, among other things, supervising activities regulated by the Securities Act. The AMF may delegate its powers to such organizations144 while still controlling their activities, 137 Eric Spink, Q.C., Securities Regulation as Property Law, June 28, 2010, A.G.A. at 342. (―Spink‖) 138 General Motors, supra, footnote 11 at para. 63. 139 Multiple Access, supra, footnote 15 at 175. 140 Act respecting the autorité des marchés financiers, R.S.Q. c. A-33.2. 141 Ibid., s. 4. See also the Securities Act, R.S.Q. c. V-1.1, s. 276. 142 Ibid., s. 8. 143 Ibid., s. 57. 144 Ibid., s. 61. No.: 200-09-006746-090 PAGE: 34 which, for example, allows it to suspend the application of a by-law, amend by-laws, or prescribe a particular course of action if public interest so requires. 145 Title IV creates the BDRVM, whose functions include taking measures under the Securities Act,146 such as suspending or imposing conditions on the rights created by registering as a dealer, adviser, or investment fund manager,147 or prescribing a course of action required by the public interest to an exchange or other body recognized by the AMF. 148  Title II of the Securities Act provides that, unless exempted, every person intending to make a distribution of securities in or outside Quebec must prepare a prospectus that contains all material facts relating to the securities issued and is subject to a receipt issued by the AMF.149 Title III provides that issuers have the obligation to provide periodic disclosure about their business and internal affairs. 150 An insider of a reporting issuer must file a report making various disclosures. 151 Title IV imposes conditions on persons making a take-over or issuer bid.152  Title V requires that any person wanting to act as a dealer, adviser, or investment fund manager register as such with the AMF.153 Registration is allowed on the basis of competence, integrity, and solvency requirements being met and may be conditional.154 The AMF may revoke, suspend, or impose conditions on a registration in the event, among other things, of bankruptcy, offence, or incapacity.155 As previously stated, the BDRVM may also revoke the rights granted by registration.156 Dealers, advisers, and investment fund managers must keep records of certain information and disclose it to the AMF upon request.157 They must also deal with their clients fairly, honestly, loyally, and in good faith.158  Title VI provides that no exchange, clearing house, information processor, matching service utility, or regulation services provider may carry on securities activities in Quebec unless it is recognized by the AMF as a self-regulatory organization.159 The AMF establishes the rules applicable to those organizations and the BDRVM may prescribe a course of action to them where public interest so requires.160 Title VII 145 Ibid., ss. 76, 77 and 80. 146 Ibid., ss. 93–94. 147 Securities Act, s. 152. 148 Ibid., s. 172. 149 Ibid., ss. 11–13. 150 Ibid., ss. 73–74. 151 Ibid., s. 89.3. 152 Ibid., s. 112. 153 Ibid., s. 148. 154 Ibid., s. 151. 155 Ibid., s. 151.0.1. 156 Ibid., s. 152. 157 Ibid., s. 159.0.1. 158 Ibid., ss. 160–160.1. 159 Ibid., s. 169. 160 Ibid., ss. 171.1.1–172. No.: 200-09-006746-090 PAGE: 35 establishes penal prohibitions and fines. It prohibits self-dealing, false representations to the AMF, misrepresentation of qualifications, multiple transactions for an account without justification, and selling a security short without first notifying the dealer responsible.161 It also sets out specific offences such as engaging in unfair, improper, or fraudulent practices,162 or making misrepresentations.163 Every person who contravenes a provision of the Securities Act commits an offence and is liable to fines or to imprisonment not exceeding five years less one day.164  Title VIII sets out the applicable rules for civil actions in the event of transactions effected without a prospectus or circular, misrepresentations made on the primary market or secondary market, the use of privileged information, and irregular take-over bids or issuer bids. These rules concern evidence, award of damages, rescinding of transactions, price revision, apportionment of liability, prescription, and jurisdiction in which proceedings are to be instituted.165 Title IX contains various enforcement measures, particularly concerning the AMF‘s powers of investigation,166 the BDRVM‘s power to make orders depriving a person of the profit realized as a result of non- compliance with securities legislation,167 and exemptions from legislative requirements.168 Among other things, the BDRVM may order a person to cease any activity in respect of a securities transaction.169Title X provides that the government or the AMF may enter into an agreement with another government or the securities commission of a Canadian territory or province for mutual delegation of authority. 170 The AMF or the BDRVM may call before it any matter that is before an extra-provincial securities commission under a delegation of authority. The AMF may incorporate by reference any provisions of extra-provincial securities legislation.171 The AMF, the BDRVM, or a recognized self-regulatory organization may make a decision on the basis of a similar decision by an extra-provincial securities commission.172 This title also allows an agreement to be reached stipulating that decisions of an authority having jurisdiction in one province or territory are recognized in the other province or territory and that an exemption from obligations fulfilled in one province or territory is given in the other province or territory.173 Last, Title XI gives the AMF the power to adopt the regulations required to enforce the Act. All regulations must be approved by the Minister 161 Ibid., ss. 187–194. 162 Ibid., s. 195.2. 163 Ibid., ss. 196–197. 164 Ibid., ss. 202–213. 165 Ibid., ss. 213.1–236.1. 166 Ibid., s. 237. 167 Ibid., s. 262.1. 168 Ibid., s. 263. 169 Ibid., s. 265. 170 Ibid., s. 306. 171 Ibid., s. 308. 172 Ibid., s. 308.0.3. 173 Ibid., s. 308.2. No.: 200-09-006746-090 PAGE: 36 of Finance, who may also make regulations of his own initiative. 174 Finally, I note that the Derivatives act175 and the Act respecting the transfer of securities and the establishment of security entitlements176 round out the existing system in Quebec. The first statute seeks to foster honest, fair, efficient, and transparent derivatives markets; protect the public from unfair, improper, or fraudulent practices, and; ensure that the public has access to adequate, true, and appropriately tailored information. 177 Title II provides that regulated entities must be recognized by the AMF to carry on derivatives activities178 and subjects such entities to a series of operating rules. The BDRVM may, among other things, prescribe a course of conduct to a recognized regulated entity if it is required by public interest.179 Title III requires that dealers and advisors be registered with the AMF180 and subjects them to rules of conduct. Title IV requires that any person first be qualified by the AMF before marketing a derivative.181 Title V deals with the administration of the statute, gives the AMF investigation powers,182 and allows the BDRVM to impose fines up to $2,000,000.183 Title X of the Securities Act allows for inter-jurisdictional cooperation to apply to the Act respecting the transfer of securities and the establishment of security entitlements. Title VII establishes specific prohibitions and offences, such as engaging in unfair, improper, or fraudulent practices,184 and making misrepresentations.185 Any person who commits an offence under this statute is liable to fines or to imprisonment for a period not exceeding five years less one day. 186 Title IX gives the AMF the power to make regulations, a power which may also be exercised by the government.187  The Act respecting the transfer of securities and the establishment of security entitlements has the purpose of establishing a legal framework for certain applicable private law aspects as part of an effort by the Canadian provinces and territories to harmonize their legislation on the matter.188 To that end, it sets out a series of definitions: transfer, issuer, securities, financial assets, notice, delivery, endorsement, warranties, and so forth. It states that the issuer is liable for the late or wrongful 174 Ibid., s. 331.2. 175 176 Derivatives act, R.S.Q. c. I-14.01. An act respecting the transfer of securities and the establishment of security entitlements, R.S.Q. c. T-11.002. 176 An act respecting the transfer of securities and the establishment of security entitlements, R.S.Q. c. T-11.002. 177 Derivatives act, supra at note 175, s. 1. 178 Ibid., s. 12. 179 Ibid., s. 49. 180 Ibid., s. 54. 181 Ibid., s. 82. 182 Ibid., s. 115. 183 Ibid., s. 134. 184 Ibid., s. 150. 185 Ibid., ss. 152–153. 186 Ibid., ss. 160–166. 187 Ibid., ss. 174–176. 188 Ibid., s. 1. No.: 200-09-006746-090 PAGE: 37 registration of a securities transfer.189 This enactment also governs the exercise of rights by holders of security entitlements.190 It places certain obligations on securities intermediaries.191 As well, it establishes the priority rules that apply to purchasers for value of rights in a security entitlement.192  Last, let it be noted that not only does the Civil Code of Québec make various references to securities, it devotes an entire subsection of Book Ten, Title Two, on conflict of laws, to this subject-matter. The articles in this subsection provide, among other things, that the validity of a movable security is governed by the law of the country under which the issuer is constituted. With the exception of any other designated legislation, issuer‘s rights and duties are also governed by the law of that country. In addition, the law of the country in which a security certificate is located at the time of its delivery governs the assertion of claims.193  The other Canadian provinces and territories all have similar regulatory schemes governing securities.194 v. Finding on pith and substance  In light of the above, it is my view that the federal government‘s purpose in the proposed Act is to make the Canadian securities regulatory regime more consistent, more effective, and better equipped to prevent the systemic risks that can threaten the financial system. I use the expression ―systemic risk‖ in the sense intended by Trebilcock in the following definition: . . . the risk of default by one market participant will impact the ability of others to fulfil their legal obligations, setting off a chain of negative economic consequences that pervade an entire financial system.195 189 Ibid., ss. 91–102. 190 Ibid., ss. 107–115. 191 Ibid., ss. 116–125. 192 Ibid., ss. 129–130. 193 C.C.Q., arts. 3108.1–3108.8. 194 Securities Act, R.S.B.C. 1996, c. 418, Securities Transfer Act, S.B.C. 2007, c. 10 (British Columbia), Securities Act, R.S.A. 2000, c. S-4, Securities Transfer Act, S.A. 2006, c. S-4.5 (Alberta), Securities Act, 1988, S.S. 1988–89, c. S–42.2, Securities Transfer Act, S.S. 2007, c. S–42.3 (Saskatchewan), Securities Act, R.S.O. 1990, c. S.5, Securities Transfer Act, 2006, S.O. 2006, c. 8 (Ontario), Securities Act, S.N.B. 2004, c. S-5.5, Securities Transfer Act, S.N.B. 2008, c. S-5.8 (New Brunswick), Securities Act, R.S.N.S. 1989, c. 418, Securities Transfer Act, S.N.S. 2010, c. 8 (Nova Scotia), Securities Act, R.S.P.E.I. 1988, c. S-3.1 (Prince Edward Island), Securities Act, R.S.N.L. 1990, c. S-13, Securities Transfer Act, S.N.L. 2007, c. S-13.01 (Newfoundland and Labrador), Securities Act, S.Y. 2007, c. 16 (Yukon), Securities Act, S.N.W.T. 2008, c. 10, Securities Transfer Act, S.N.W.T. 2009, c. 14 (Northwest Territories), Securities Act, S.Nu. 2008, c. 12, Securities Transfer Act, S Nu. 2010, c. 15 (Nunavut). 195 Trebilcock, supra, footnote 116, A.G.C. at 343. No.: 200-09-006746-090 PAGE: 38  Given the contradictory expert evidence before the Court and the applicable standard of evidence, for the time being, it is enough to identify these problems as those targeted by the government without having to comment on their existence. This conclusion is also based on my historical review of the harmonization initiatives undertaken since the early 20th century and the many reports published on those occasions. Finally, the Preamble and sections 9 and 16 of the proposed Act confirm the pursuit of these three main objectives.  It is dangerous to assess the potential effects of legislation that has not yet been enacted. It is necessary to do so, however, to ensure that the identification of the pith and substance of the proposed Act is not limited to the dominant characteristic its author wishes to attribute to it but provides the best possible description of reality. Doing otherwise could result in the Court finding colourable legislation valid and legitimizing a misuse of power. Indeed, Justice Rand of the Supreme Court provides an explicit warning in the Margarine Reference: Ordinarily a preamble indicates the purpose of the statute and it may be a guide to the meaning and scope of the language where that is doubtful or ambiguous. But when the question is the real character of the legislation for the purposes of jurisdiction between two legislatures under a federal constitution, different considerations arise. A legislation cannot conclude the question by a declaration in a preamble: at most it is a fact to be taken into account, the weight to be given to it depending on all the circumstances . . . 196 [Emphasis added.]  There is no doubt that the federal government is seeking to reduce costs and prevent systemic risks. Harmonized legislation and its potential benefits are, however, irrelevant when it comes to identifying the pith and substance of a statute since a federal statute, by definition, can uniformly apply a mari usque ad mare, while a provincial law is confined to the province concerned. Since any federal statute has some harmonizing effect, examining such a purpose would be circuitous, and limiting oneself to it would be refraining from identifying the matter to which the proposed Act actually relates.  Moreover, the limited importance of the few measures to which the purpose of preventing systemic risks can be related satisfies me that this is not the pith and substance of the proposed Act, despite the importance it is given in the Preamble and in sections 9 and 16. In that respect, the proposed Act provides only for the following: in Part 14, the power to intervene urgently on the part of the Governor in Council and in parts 1 and 2, two structures dedicated to the exchange of information with respect to regulation, namely the Council of Ministers and the Regulatory Policy Forum. These measures are too few and too insignificant in terms of their likely effect for one to be able to characterize them as being dominant. On the contrary, Choi and Spink convince me that the proposed Act, through the regulation of the overall conduct by participants 196 Reference re Validity of Section 5 (a) Dairy Industry Act,  S.C.R. 1, pp. 47–48. No.: 200-09-006746-090 PAGE: 39 in the securities market, indirectly addresses the prevention of systemic risks most significantly.  On that topic, Justice Beetz made a relevant distinction between the occasion on which a statute is enacted and its pith and substance in his dissent to Re: Anti-Inflation Act. A statute that is part of a general program aiming to achieving a purpose that is also general does not necessary fall within the subject matter of that purpose: I have no reason to doubt that the Anti-Inflation Act is part of a more general program aimed at inflation and which may include fiscal and monetary measures and government expenditure policies. I am prepared to accept that inflation was the occasion or the reason for its enactment. But I do not agree that inflation is the subject matter of the Act. In order to characterize an enactment, one must look at its operation, at its effects and at the scale of its effects rather than at its ultimate purpose where the purpose is practically all embracing. . . . [t]he Anti- Inflation Act is, as its preamble states, clearly a law relating to the control of profit margins, prices, dividends and compensation, that is, with respect to the provincial private sector, a law relating to the regulation of local trade, to contract and to property and civil rights in the provinces, enacted as part of a program to combat inflation. Property and civil rights in the provinces are, for the greater part, the pith and substance or the subject matter of the Anti-Inflation Act. . . .197  Moreover, the proposed Act has the classic attributes of a scheme regulating the conduct of participants in the securities market. It governs issues on the primary market and transactions on the secondary market through various requirements (requirement to produce information and representations from issuers‘ insiders, recognition of intermediaries, designation of persons able to provide market participants with services, framework for take-over bids, prohibition of conduct intended to deceive the market, etc.) and provides for the respect of these requirements through criminal penalties and a series of civil remedies. I therefore conclude that the dominant characteristic, the main thrust, the pith and substance of the proposed Act is the regulation of the securities trade.  I do not see a concurrent pith and substance, such as maintaining the integrity of the financial system or keeping capital markets competitive, which would allow Parliament to enact the Act under the double aspect doctrine. The other aspects that have been argued by the AGC are excessively general and purely incidental to the proposed Act. Indeed, the proposed Act distinguishes itself from the other matters that can be subject to a double aspect, insofar as the federal regime is not being proposed as a complementary framework to the provincial regimes, but as a substitute regime. The proposed provisions are so similar to those of the provincial legislation currently in effect that the latter are bound to be rendered of no force or effect because of their inconsistency, unless they are outright removed. 197 Re: Anti-Inflation Act, supra, footnote 36, pp. 452–453. No.: 200-09-006746-090 PAGE: 40  I will now assess which subject class under the Constitution Act, 1867, the pith and substance of the proposed Act falls under. I will begin with the provincial power over property and civil rights and continue with the federal power over trade and commerce.  The following comments made by Justices Binnie and LeBel in Canadian Western Bank v. Alberta will guide this characterization exercise: The division of powers in ss. 91 to 95 of the Constitution Act, 1867 form the bedrock of our federal system. They seek to preserve local diversity within the federal nation by conferring ―[b]road powers‖ on provincial legislatures, while at the same time ―reserving to Parliament powers better exercised in relation to the country as a whole‖[.]198 3. Provincial power over property and civil rights a) Historical origins  The provincial power over property and civil rights can be traced back to early European colonization. Following the clash of two empires, which the inhabitants of North America had to witness at the time of the Conquest, George III, King of Great Britain and Ireland, introduced English criminal and civil law in the Province of Quebec. In his Royal Proclamation, 1763,199 he provided as follows: We have given Power under our Great Nous avons donné aux gouverneurs de Seal to the Governors of our said Nos colonies sous Notre grand sceau, Colonies respectively to erect and le pouvoir de créer et d'établir, de l'avis constitute, with the Advice of our said de Nosdits conseils, des tribunaux Councils respectively, Courts of civils et des cours de justice publique Judicature and public Justice within our dans Nosdites colonies pour entendre Said Colonies for hearing and et juger toutes les causes aussi bien determining all Causes, as well criminelles que civiles, suivant la loi et Criminal as Civil, according to Law and l'équité, conformément autant que Equity, and as near as may be possible aux lois anglaises; […](je agreeable to the Laws of England, . . . souligne) [Emphasis added.]  The Act for making more effectual Provision for the Government of the Province of Quebec in North America, known as the Quebec Act, 1774,200 introduced a new balance between English and French Canadians. In section VIII, the Act re-established French private law for property and civil rights issues: 198 Canadian Western Bank v. Alberta,  2 S.C.R. 3, 2007 SCC 22 at para. 22. 199 Royal Proclamation, 1763 (U.K.), reproduced in R.S.C. 1985, Appendix II, No. 1, 3. 200 Quebec Act, 1774, 14 George III, c. 83 (U.K.), Section VIII, reproduced in R.S.C. 1985, Appendix II, No. 2, p. 5. No.: 200-09-006746-090 PAGE: 41 And be it further enacted by the Il est aussi Établi par la susdite autorité, Authority aforesaid, That all his que tous les sujets Canadiens de Sa Majesty's Canadian Subjects within the Majesté en ladite province de Québec; Province of Quebec . . . may also hold […] pourront aussi tenir leurs and enjoy their Property and propriétés et possessions, et en jouir, Possessions, together with all Customs ensemble de tous les usages et and Usages relative thereto, and all coutumes qui les concernent, et de other their Civil Rights in as large, tous leurs autres droits ce citoïens, ample, and beneficial Manner as if the d'une manière aussi ample, aussi said Proclamation, Commissions, étendue, et aussi avantageuse, que si Ordinances, and other Acts and les dites proclamation, commissions, Instruments had not been made, and ordonnances, et autres actes et as may consist with their Allegiance to instruments, n'avoient point été faits, his Majesty, and Subjection to the en gardant à sa Majesté la foi et fidélité Crown and Parliament of Great Britain; qu'ils lui doivent, et la soumission due and that in all Matters of Controversy, à la couronne et au parlement de la relative to Property and Civil Rights, Grande-Bretagne: et que dans toutes Resort shall be had to the Laws of affaires en litige, qui concerneront leurs Canada, as the Rule for the Decision propriétés et leurs droits de citoïens, ils of the same . . . [Emphasis added.] auront recours aux lois du Canada, comme les maximes sur lesquelles elles doivent être décidées […] (je souligne)  Professor Gil Rémillard notes that the constitutional documents that followed were consistent with the Quebec Act, 1774. He emphasizes the importance of this process for the preservation of legal traditions: [TRANSLATION] For the French Canadians of Lower Canada, the Act of 1867 first meant the end of the scheme of union, which was considered to be an injustice that had been imposed following the troubles of 1837–38. For them, the federal pact was thus a decisive step in the legal expression of their national identity. In that sense, the Act of 1867 was an extension of the Quebec Act, 1774, and the Constitutional Act, 1791, which allowed the community that was conquered in 1760 to rediscover its legal traditions and its national identity.201 [Emphasis added.]  Tremblay shares this view: [TRANSLATION] 201 Gil Rémillard, Le fédéralisme canadien [Canadian Federalism] (Montreal: Éditions Québec Amérique, 1980) at 102. (hereafter ―Rémillard‖) No.: 200-09-006746-090 PAGE: 42 Subsection 92(13) of the British North America Act therefore seems to be intimately connected to the history of Canada, particularly to the preservation of French civil law in the province of Quebec. In the Quebec Act, 1774, the expression ―property and civil rights‖ is a legal guarantee for the preservation of French civil law; it guarantees the continuity of the French intellectual tradition in private law. It authorizes Canadians, in accordance with the principles of international law and the practice of nations, to regulate their private relationships according to a well-known legal system.202  Justice L‘Heureux-Dubé made a similar observation in Laurentide Motels Ltd. v. Beauport (City): The Quebec Act of 1774 sealed the fate of the two major legal systems that would govern the law applicable in Quebec: French civil law as it stood before 1760 with its subsequent amendments in Quebec for everything relating to property and civil rights, and the common law as it stood in England at that time, and as subsequently amended, for what related to public law.203  Section XXXIII of the Act to repeal certain Parts of an Act, passed in the fourteenth Year of his Majesty’s Reign, intituled, An Act for making more effectual Provision for the Government of the Province of Quebec, in North America; and to make further Provision for the Government of the said Province204 provided for the preservation of existing laws in the newly created Upper and Lower Canada: And be it further enacted by the Et il est de plus statué par la dite Authority aforesaid, That all Laws, Autorité, que toutes Loix, Statuts, et Statutes, and Ordinances, which shall Ordonnances, qui seront en force le be in force on the Day to be fixed in the jour qui sera fixé de la manière ci- Manner herein-after directed for the après ordonne pour le commencement Commencement of this Act, within the de cet Acte, dans les dites Provinces, said Provinces, or either of them, or in ou l'une ou l'autre d'icelles, ou dans any Part thereof respectively, shall aucune de leurs parties remain and continue to be of the same respectivement, resteront et Force, Authority, and Effect, in each of continueront dans la même force, the said Provinces respectively, as if autorité, et effet, dans chacune des this Act had not been made, and as if dites Provinces respectivement, the said Province of Quebec had not comme si cet Acte n'eut pas été fait; et been divided; except in so far as the comme si la dite Province de Québec; same are expressly repealed or varied n'eut pas été divisée; excepte en by this Act, or in so far as the same autant qu'elles ont été expressément 202 André Tremblay, Les Compétences législatives au Canada et les pouvoirs provinciaux en matière de propriété et de droits civils (Ottawa: Éditions de l‘Université d‘Ottawa, 1967) at 126. (hereafter ―Tremblay‖) 203 Laurentide Motels Ltd. v. Beauport (City),  1 S.C.R. 705, 735. 204 Constitutional Act, 1791, 31 George III, c. 31 (U.K.), reproduced in R.S.C. 1985, Appendix II, No. 3. No.: 200-09-006746-090 PAGE: 43 shall or may hereafter, by virtue of and rappelées ou variées par cet Acte, ou under the Authority of this Act, be en autant qu'elles seront ou pourront repealed or varied by his Majesty, his ci-après, en vertu et sous l'autorité de Heirs or Successors, by and with the cet Acte, être rappellées ou variées par Advice and Consent of the Legislative sa Majesté, ses Héritiers ou Councils and Assemblies of the said Successeurs, par et de l'avis et Provinces respectively, . . . [Emphasis consentement des Conseils Législatifs added.] et des Assemblées des dites Provinces respectivement, […] (je souligne)  Section XLVI of the Union Act, 1840, or the Act to re-unite the Provinces of Upper and Lower Canada, and for the Government of Canada, essentially reproduces the same text.205 Lastly, the Constitution Act, 1867, uses the English expression ―Property and Civil Rights‖ as it stood in the list of enumerated provincial powers. It also specified that all the laws in effect in Quebec at the time of union would continue to be in effect until amended by Parliament, meaning that some laws are still in effect today despite Confederation. 92. In each Province the Legislature 92. Dans chaque province la législature may exclusively make Laws in relation pourra exclusivement faire des lois to Matters coming within the Classes of relatives aux matières tombant dans Subjects next hereinafter enumerated; les catégories de sujets ci-dessous that is to say, . . . énumérés, savoir : […] 13. Property and Civil Rights in the 13. La propriété et les droits civils dans Province. . . . la province; […] 129. Except as otherwise provided by 129. Sauf toute disposition contraire this Act, all Laws in force in Canada, prescrite par la présente loi, toutes les Nova Scotia, or New Brunswick at the lois en force en Canada, dans la Union, and all Courts of Civil and Nouvelle-Écosse ou le Nouveau- Criminal Jurisdiction, and all legal Brunswick, lors de l'union, tous les Commissions, Powers, and Authorities, tribunaux de juridiction civile et and all Officers, Judicial, criminelle, toutes les commissions, Administrative, and Ministerial, existing pouvoirs et autorités ayant force therein at the Union, shall continue in légale, et tous les officiers judiciaires, Ontario, Quebec, Nova Scotia, and administratifs et ministériels, en New Brunswick respectively, as if the existence dans ces provinces à Union had not been made; subject l'époque de l'union, continueront nevertheless (except with respect to d'exister dans les provinces d'Ontario, such as are enacted by or exist under de Québec, de la Nouvelle-Écosse et Acts of the Parliament of Great Britain du Nouveau-Brunswick or of the Parliament of the United respectivement, comme si l'union 205 Union Act, 1840, 3-4 Victoria, c. 35 (U.K.), reproduced in R.S.C. 1985, Appendix II, No. 4, 4–5. No.: 200-09-006746-090 PAGE: 44 Kingdom of Great Britain and Ireland), n'avait pas eu lieu; mais ils pourront, to be repealed, abolished, or altered by néanmoins (sauf les cas prévus par the Parliament of Canada, or by the des lois du parlement de la Grande- Legislature of the respective Province, Bretagne ou du parlement du according to the Authority of the Royaume-Uni de la Grande-Bretagne Parliament or of that Legislature under et d'Irlande), être révoqués, abolis ou this Act. modifiés par le parlement du Canada, ou par la législature de la province respective, conformément à l'autorité du parlement ou de cette législature en vertu de la présente loi.  Although the Fathers of Confederation have not commented much specifically on the preservation of civil law as a provincial power, Tremblay remarks in his examination of subsection 92(13) that this was undeniably one of the conditions of the compromise that led to the union of the four founding provinces: [TRANSLATION] [T]he differences between the legal systems of Lower Canada and the other provinces were, even in Macdonald‘s view, one of the underlying causes of the failure to achieve legislative union; the requirement to maintain these differences therefore led to federation. Lower Canada would never have agreed to a system that would have deprived it of the benefits of the Quebec Act or that would have randomized the benefits of the codification of its civil laws.206  The purpose of confederation is one of the principles applicable in constitutional interpretation. In Re: Resolution to amend the Constitution207 the Supreme Court considered the definition established by the Privy Council in Maritime Bank of Canada (Liquidators of) v. New Brunswick (Receiver-General), which Lord Watson formulated as follows: The object of the Act was neither to weld the provinces into one, nor to subordinate provincial governments to a central authority, but to create a federal government in which they should all be represented, entrusted with the exclusive administration of affairs in which they had a common interest, each province retaining its independence and autonomy.208 [Emphasis added.]  This review of Canada‘s various constitutional documents reveals that the expression ―Property and Civil Rights in the Province‖ reflects the evolution of the 206 Tremblay, supra, footnote 202, at 43. 207 Re: Resolution to amend the Constitution,  1 S.C.R. 753, 905. 208 Maritime Bank of Canada (Liquidators of) v. New Brunswick (Receiver-General),  A.C. 437, 441–442 No.: 200-09-006746-090 PAGE: 45 protection of private law in Quebec since the fall of New France. It follows that the meaning of this expression must take into account the historical and political context in which it originated. The enactment of the Quebec Act, 1774, offered some protection to the existence of French Canadians. The expression therefore refers to the entire body of private law governing the interactions between persons in Quebec. The best-known example of this power is, without contest, the enactment of the Civil Code of Lower Canada in 1865, the precursor to the current Civil Code of Québec. Hogg comments as follows: [S]ubject to the qualifications required by the new federal scheme, it is clear that the framers of the Constitution Act understood the familiar phrase [―Property and Civil Rights‖] in the same sense it obtained in 1792 and 1774, that is to say, as a compendious description of the entire body of private law which governs the relationships between subject and subject, as opposed to the law which governs the relationship between the subject and the institutions of government.209 [Emphasis added.]  Thus, if it were not for its historical origins, subsection 92(13) of the Constitution Act, 1867, could simply be referred to as ―private law in the province‖. However, given their profound importance, these origins cannot be ignored and must guide the Court‘s analysis. b) Provincial residual clause  In addition to forming the foundation of civil law in Canada, the provincial power over property and civil rights contributes to the federal balance of powers byhaving played, to some extent, the role of a provincial residual clause. Clearly, the real residual power provided for by the Constitution Act, 1867, is vested in Parliament under the introductory paragraph of section 91. However, the courts‘ association of this power with subsection 92(16) suggests a residual function.  Subsection 92(16) provides for a general provincial power over ―Generally all Matters of a merely local or private Nature in the Province‖. Rémillard, however, characterizes this as a [TRANSLATION] ―mini residual power‖ and notes that, given how narrowly it has been interpreted, it is subsection 92(13) that has this function: [TRANSLATION] Contrary to the federal residual power at the beginning of section 91, that of the provinces is the last subject class enumerated at section 92 and has been applied in a highly restrictive manner. It seems that originally, subsection 92(16) was intended to be a compromise to counterbalance the federal power to legislate for the peace, order, and good government of the country, but it was a 209 Hogg, supra, footnote 17 at 21-2. No.: 200-09-006746-090 PAGE: 46 very slight compromise that, overall, served more as camouflage than as an effective counterweight. Section 92, which grants the provinces their spheres of jurisdiction, was drafted in highly restrictive terms. Only the Judicial Committee of the Privy Council‘s liberal interpretation of subsection 92(13), which concerns property and civil rights, made it possible to broaden the scope of section 92 to establish a certain balance with the federal government.210 [Emphasis added.]  Professor Gérald-A. Beaudoin notes the link made between the two sections, but cautions that they have distinct meanings: [TRANSLATION] In practice, the courts often encompass subsection (16) in subsection (13); there is a distinction to be made, however. Subsection (16) is a residual power, which includes local public order . ...211  In contrast, Professor Nicole Duplé is of the opinion that subsections 13 and 16 apply jointly to form the provincial residual power: [TRANSLATION] Subsection 16 therefore confers a power on the legislatures that complements the heads of power already enumerated in section 92, particularly subsection 13, which is, to some extent, also a provincial residual power because of the large number of matters likely to fall under it. . . . Despite [the removal of subject classes enumerated at section 91], the power under subsection 92(13) is sufficiently inclusive in scope, especially when it is examined in conjunction with subsection 16 of the same section, for many legislative matters to fall under it. The Civil Code of Québec and generally all legislation concerning the relationships between private persons in the province fall within subsection 92(13).212  This approach was recently noted by the Chief Justice of the Supreme Court, who noted the broad scope of the provincial power over property and civil rights in Reference re Assisted Human Reproduction Act: In the present appeal, the ancillary provisions generally fall under the provincial powers over property and civil rights (s. 92(13)) and matters of a merely local or private nature (s. 92(16)). Both of these heads of power are very broad, and they 210 Rémillard, supra, footnote 201 at 150. 211 Gérald A.-Beaudoin, La Constitution du Canada [The Canadian Constitution], 3rd ed, with the collaboration of Pierre Thibault (Montreal: Wilson & Lafleur, 2004) at 415. 212 Nicole Duplé, Droit constitutionnel: principes fondamentaux [Constitutional Law: Basic Principles], 4th ed (Montreal: Wilson & Lafleur, 2009) at 378. No.: 200-09-006746-090 PAGE: 47 are often seen as sources of residual jurisdiction: see Hogg, at pp. 17-2 and 17-3.213 [Emphasis added.]  What follows is the excerpt to which the Chief Justice is referring: In Canada, the provincial heads of power include one of great extent and importance. This is s. 92(13), ―property and civil rights in the province‖, a phrase which is apt to include most of the private law of property, contracts and torts and their many derivatives. Indeed, at the hands of the Privy Council, s. 92(13) became a kind of residuary power itself, and one which was much more important than the federal peace, order, and good government power. A second potentially sweeping head of provincial power is s. 92(16), ―generally all matter of a merely local or private nature in the province‖. Albert S. Abel used the existence of s. 92(16) as the basis for an argument that there is no residuary power in the Constitution Act, 1867 at all. He said that p.o.g.g. and s. 92(16) were two complementary grants of power which distributed the residue between the two levels of government. But, as Abel himself conceded, one might just as easily speak of two residuary clauses as none, and of the two s. 92(16) has in practice turned out to be quite unimportant, because its work has been done for it by s. 92(13).214 [Emphasis added.]  It therefore seems possible that subsection 92(13) is a provincial quasi-residuary clause that operates in conjunction with subsection 92(16) of the Constitution Act, 1867. The frequent reference made to it suggests that it has the function of balancing the constitutional division of powers between the two levels of government, a function that might be worth taking into account when the subsection is interpreted. c) Scope of power  The Judicial Committee of the Privy Council‘s decision in Citizens' Insurance Company of Canada v. Parsons is the leading authority on defining the provincial power over property and civil rights in the province. In Parsons, it was argued that an Ontarian insurance act, the Act to secure uniform Conditions in Policies of Fire Insurance, was ultra vires the provincial power because it came within the federal power over trade and commerce. Sir Montague Smith wrote eloquently on the difficulty of interpreting the expression ―trade and commerce‖ without it including what the Fathers of Confederation had intended to fall within the power over ―property and civil rights‖: Notwithstanding this endeavour to give pre-eminence to the dominion parliament in cases of a conflict of powers, it is obvious that in some cases where this apparent conflict exists, the legislature could not have intended that the powers exclusively assigned to the provincial legislature should be absorbed in those 213 Reference re Assisted Human Reproduction Act, supra, footnote 17 at para. 134. 214 Hogg, supra, footnote 17 at 17-2 and 17-3. No.: 200-09-006746-090 PAGE: 48 given to the dominion parliament. . . . With regard to certain classes of subjects, therefore, generally described in sect. 91, legislative power may reside as to some matters falling within the general description of these subjects in the legislatures of the provinces. In these cases it is the duty of the Courts, however difficult it may be, to ascertain in what degree, and to what extent, authority to deal with matters falling within these classes of subjects exists in each legislature, and to define in the particular case before them the limits of their respective powers. It could not have been the intention that a conflict should exist; and, in order to prevent such a result, the two sections must be read together, and the language of one interpreted, and, where necessary, modified, by that of the other. In this way it may, in most cases, be found possible to arrive at a reasonable and practical construction of the language of the sections, so as to reconcile the respective powers they contain, and give effect to all of them. 215 [Emphasis added.]  He finally concluded that the act in question fell within the jurisdiction of the provincial legislature since it was related to contracts and the rights arising from them. His reasoning is based on an interpretation of subsection 92(13) of the Constitution Act, 1867, as establishing a private law regime rooted in a civil tradition in Quebec: The province of Quebec is omitted from [section 94 of the British North America Act] for the obvious reason that the law which governs property and civil rights in Quebec is in the main the French law as it existed at the time of the cession of Canada, and not the English law which prevails in the other provinces. The words "property and civil rights" are, obviously, used in the same sense in this section as in No. 13 of sect. 92, and there seems no reason for presuming that contracts and the rights arising from them were not intended to be included in this provision for uniformity. If, however, the narrow construction of the words "civil rights," contended for by the appellants were to prevail, the dominion parliament could, under its general power, legislate in regard to contracts in all and each of the provinces and as a consequence of this the province of Quebec, though now governed by its own Civil Code, founded on the French law, as regards contracts and their incidents, would be subject to have its law on that subject altered by the dominion legislature, and brought into uniformity with the English law prevailing in the other three provinces, notwithstanding that Quebec has been carefully left out of the uniformity section of the Act.216  In Lawson v. Interior Tree Fruit and Vegetable Committee of Direction, Justice Duff provided the following explanation for the narrow interpretation of subsection 91(2) of the Constitution Act, 1867, in favour of the provincial power over property and civil rights: 215 Parsons, supra, footnote 19, 109. 216 Ibid., 110–111. No.: 200-09-006746-090 PAGE: 49 The scope which might be ascribed to head 2, s. 91 (if the natural meaning of the words, divorced from their context, were alone to be considered), has necessarily been limited, in order to preserve from serious curtailment, if not from virtual extinction, the degree of autonomy which, as appears from the scheme of the Act as a whole, the provinces were intended to possess.217  In Lymburn c. Mayland,218 the Privy Council confirmed provincial power over securities under subsection 91(13) of the Constitution Act, 1867. In Lymburn, it was argued that, as in Reference re: The Sale of Shares Act, 1924 (Man.),219 Alberta‘s Security Frauds Prevention Act interfered with the federal power over the incorporation of companies by virtue of the peace, order, and good government power. Lord Atkin was of the view that the purpose of the act was ―to secure that persons who, carry on the business of dealing in securities shall be honest and of good repute, and in this way to protect the public from being defrauded‖.220 He found that it was normal for acompany to be subject to the laws of the province concerning the trading in securities and that there was no reason to conclude that the activities of a federally incorporated company were likely to be paralyzed by the provincial legislation.  The year 1949 marked the abolition of appeals of Supreme Court of Canada decisions before the Judicial Committee of the Privy Council. Attempting to uphold the principle of federalism as Sir Montague Smith did, the Privy Council interpreted provincial powers so as that they would not, within a few decades, be supplanted by the federal residuary power to legislate for the peace, order, and good government of Canada. Tremblay comments as follows: [TRANSLATION] It was up to the Privy Council to determine whether the constitution was federal or not. By deciding to adopt federalism as the basic doctrine of the 1867 union, it was from then on difficult for it not to make the logical amendments to the Act and to bring it slightly more in line with the fundamental principles. The federal powers were clearly too broad and those of the provinces too limited and, also, seriously jeopardized. The Privy Council first had to minimally secure the provinces‘ powers and restrict those of the Dominion. It is from that perspective that the Privy Council‘s constant concern to protect and expand provincial rights must be understood. Subsection 92(13) benefitted from this, but subsection 92(16) could have done more so.221 217 Lawson v. Interior Tree Fruit and Vegetable Committee of Direction,  S.C.R. 357, 366. 218 Lymburn v. Mayland,  A.C. 318. (hereafter ―Lymburn‖) 219 Reference re: The Sale of Shares Act, 1924 (Man.),  A.C. 260. 220 Lymburn, supra, footnote 218 at para. 5. 221 Tremblay, supra, footnote 202, 67–68. No.: 200-09-006746-090 PAGE: 50  Provincial jurisdiction in regulating securities was confirmed by the Supreme Court in Smith v. The Queen,222 which deals with its interaction with the federal criminal law power under subsection 91(27). The Securities Act of Ontario made it an offence to make fraudulent misstatements in a prospectus required for the issue of securities. The Act provided for a maximum fine of $2,000 for a person or $25,000 for a company and imprisonment for a term of not more than one year. Chief Justice Kerwin confirmed that the Act was constitutional as per Lymburn. He added that the purpose of the offences was to ensure that issuers and securities were registered before the securities could be distributed to the public and that this purpose could be validly pursued by both the province and Parliament in relation to the criminal law subject class under the double aspect doctrine.223  In Gregory & Company Inc. v. Quebec Securities Commission 224 the Supreme Court ruled on the territorial scope of the jurisdiction granted under subsection 92(13) of the Constitution Act, 1867, which deals with property and civil rights ―in the province.‖ A broker submitted that he was not subject to the Quebec act because he dealt with non- residents. The securities in question were traded in the province and he received payment at his Montreal office. Justice Fauteaux, then a puisne judge, stated that the pith and substance of the law was similar to what was challenged in Lymburn, involving the regulation of the conduct of traders on the securities market for the purposes of protecting the public. On the issue of territoriality, he described the broker‘s activities as ―activities initiated in the province by persons therein carrying on such a business‖ and concluded that they must be regulated under Quebec legislation.225  In Vapor Canada, the Supreme Court studied the validity of a provision of the Trade-marks Act which provided civil recourses against persons involved in unfair competition. It was submitted that the Act was valid under federal criminal law jurisdiction, the regulation of trade and commerce in general and patents and trade- marks. Chief Justice Laskin ruled that the provision was ultra vires because it encroached on provincial jurisdiction regarding civil recourses. 226 In the following section we will examine the analysis conducted regarding subsection 91(2) of the Constitution Act, 1867.  The judgment in Canadian Indemnity Co. v. Attorney General of British Columbia227 dealt with provincial jurisdiction over property and civil rights as opposed to federal jurisdiction regarding interprovincial trade and commerce under subsection 91(2) of the Constitution Act, 1867 and federally incorporated companies under the jurisdiction granted by the preamble of that section. British Columbia had implemented a compulsory and universal automobile insurance program, the constitutional validity of 222 Smith v. The Queen,  S.C.R. 776. 223 Ibid. at 781. 224 Gregory & Company Inc. v. Quebec Securities Commission,  S.C.R. 584 225 Ibid. at 588. 226 Ibid. at 165 227 Canadian Indemnity Co. v. Attorney General of British Columbia,  2 S.C.R. 504. No.: 200-09-006746-090 PAGE: 51 which was challenged. After having noted the national expansion of the insurance industry and the impact the new program would have on their activities, Justice Martland concluded that the pith and substance of the Act was nevertheless the regulation of the insurance industry within the province, which was of provincial jurisdiction.228 Justice Martland also dismissed the second submission on the basis of Parsons.229  Multiple Access was also rendered along the same line of thought. It was alleged that some sections of the Ontario Securities Act were ultra vires provincial jurisdiction because of their impact on federally incorporated companies. Justice Dickson, then a puisne judge, ruled that the impugned provisions were validly enacted. He ruled that the pith and substance of the Securities Act was the regulation of the securities industry and he noted that subject to provisions which would have the effect of paralysing the operation of a federally incorporated company, such regulations were widely acknowledged as being of provincial jurisdiction regarding property and civil rights: But federal incorporation does not render a company immune from securities regulation of general application in a province. Since the decision of the Privy Council in Lymburn v. Mayland,  A.C. 318 the provisions of provincial securities acts have been given a wide constitutional recognition. . . . Subject to that exception, a federal company empowered to carry on a particular business in a province is subject to the competent legislation of the province as to that business. If it wishes to raise capital through the sale of securities there is no reason why it should not be subject to the laws of the province applicable to all those in the province who wish to raise capital through security sales, and subject thereafter to rules requiring honest dealings in securities, so that the public be not defrauded.230 [Emphasis added.]  I will address the comments of Justices Dickson and Estey regarding the interaction between provincial securities legislation and federal jurisdiction over interprovincial and international trade further on in this judgment.  The judgment in Global Securities dealt with the constitutionality of the British Columbia Securities Act, which empowered the British Columbia Securities Commission to require some information from market traders and to forward such to the SEC. Similarly to the situation in Gregory, the Court was asked if the article which authorized this cooperation was ultra vires the province‘s territorial scope of jurisdiction. Justice Iacobucci concluded that the impugned provision was of provincial jurisdiction over property and civil rights and that, accordingly, it was unecessary to rule on the overall 228 Ibid. at 512. 229 Ibid. at 519. 230 Ibid. at 183–184. No.: 200-09-006746-090 PAGE: 52 validity of the Act. He added that even if the provision itself was not of provincial jurisdiction, it was a necessary incident to a valid legislative scheme.  He described the pith and substance of the impugned provision as follows: ―…the effective regulation of domestic securities, has long been recognized to fall within provincial authority.‖231 Justice Iacobucci also underlined the fact that this jurisdiction ―is not limited to purely intraprovincial matters.‖ He made an analogy with the professional conduct of lawyers, a question of personal jurisdiction which may exceed boundaries and the personal regulation of traders in securities. In both cases he concluded that obtaining information about infringements that were committed abroad is part of the pith and substance of legislation which purports to regulate a field of activity within a province.232  It therefore appears, as Hogg has written, that subject to heads of jurisdiction specifically conferred on Parliament the regulation of a specific sector of the economy must be seen from the point of view of contract relations and of provincial jurisdiction rather than on the basis of national objectives which it may also pursue: The gaps in federal power [as it relates to business] are covered by the provincial power over property and civil rights. The double-aspect doctrine also ensures substantial areas of concurrency even when federal power exists. The point is that the regulation of an industry, or the more general regulation of prices or profits or combinations, has traditionally been regarded by the courts, not in terms of its ultimate, often nation-wide objectives, but in terms of its immediate impact upon freedom of contract and property rights. In these terms, of course, restraints on business fall into the category of property and civil rights in the province.233 [Emphasis added.] d) Finding on property and civil rights power  This review of case law shows that the regulation of securities is of exclusive provincial jurisdiction under the head of property and civil rights in the province. This conclusion is consistent with the possibility that subsection 92(13) acquired the status over time of a quasi-residuaryl clause of provincial jurisdiction. Enacted thereunder, provincial legislation governing securities may also have incidental effects on matters of federal jurisdiction. Accordingly, such legislation may impose obligations on federally incorporated companies if it does not paralyze their activities. Such legislation may create offences that are similar to what Parliament may create in criminal matters. Finally, it may exceed strictly intraprovincial matters and deal with industries that have interprovincial contracts or that require a certain portion of international cooperation. This overlapping is then subject to a double aspect. 231 Global Securities, supra, footnote 16 at para. 40. 232 Ibid. at paras 41-42. See also paras 33–34. 233 Hogg, supra, footnote 17 at 21–9. No.: 200-09-006746-090 PAGE: 53  I am therefore of the opinion that except for the national structures and criminal offences for which it provides, the proposed Act could be validly enacted by the provinces under their jurisdiction over property and civil rights. In the following section, I will determine if the same conclusion can be reached regarding federal jurisdiction over trade and commerce. 4. Federal jurisdiction over trade and commerce  Subsection 91(2) of the Constitution Act, 1867, provides the following: 91. It shall be lawful for the Queen, by 91. Il sera loisible à la Reine, de l'avis et and with the Advice and Consent of the du consentement du Sénat et de la Senate and House of Commons, to Chambre des Communes, de faire des make Laws for the Peace, Order, and lois pour la paix, l'ordre et le bon good Government of Canada, in gouvernement du Canada, relation to all Matters not coming within relativement à toutes les matières ne the Classes of Subjects by this Act tombant pas dans les catégories de assigned exclusively to the sujets par la présente loi exclusivement Legislatures of the Provinces; and for assignés aux législatures des greater Certainty, but not so as to provinces; mais, pour plus de garantie, restrict the Generality of the foregoing sans toutefois restreindre la généralité Terms of this Section, it is hereby des termes ci-haut employés dans le declared that (notwithstanding anything présent article, il est par la présente in this Act) the exclusive Legislative déclaré que (nonobstant toute Authority of the Parliament of Canada disposition contraire énoncée dans la extends to all Matters coming within présente loi) l'autorité législative the Classes of Subjects next exclusive du parlement du Canada hereinafter enumerated; that is to say, s'étend à toutes les matières tombant ... dans les catégories de sujets ci- dessous énumérés, savoir : […] 2. The Regulation of Trade and Commerce. . . . 2. La réglementation du trafic et du commerce. […] And any Matter coming within any of the Classes of Subjects enumerated in this Et aucune des matières énoncées dans Section shall not be deemed to come les catégories de sujets énumérés within the Class of Matters of a local or dans le présent article ne sera réputée private Nature comprised in the tomber dans la catégorie des matières Enumeration of the Classes of d'une nature locale ou privée Subjects by this Act assigned comprises dans l'énumération des exclusively to the Legislatures of the catégories de sujets exclusivement Provinces.(47) assignés par la présente loi aux législatures des provinces. No.: 200-09-006746-090 PAGE: 54  I will begin by noting that there is unfortunately no official French-language version of the Constitution Act, 1867. Different translations of the expression ―Trade and Commerce‖ are used. The Department of Justice of Canada suggests the French translation of ―trafic et commerce‖ and in its most recent judgments the Supreme Court used the expression ―échanges et commerce.‖ Lacking anything better, I will use the second expression.  Going back in our constitutional history, we note the use of the expression ―Regulation of Commerce‖ at section XLVI of the Constitution Act, 1791,234 which provided that the Imperial Parliament would not collect any more income tax in the colonies except for what was required for the regulation of interprovincial trade and the amount of such income tax was to be spent in the colony where it was collected: That the King and Parliament of Great Que le Roi et le Parlement de la Grande Britain will not impose any Duty, Tax, Bretagne n'imposeront aucun Droit or Assessment whatever, payable in Taxe, ou Cottisation quelconque, any of his Majesty's Colonies, paiable dans aucune des Colonies, Provinces, and Plantations in North Provinces et Plantations de sa Majesté America or the West Indies, except dans l'Amérique du Nord ou dans les only such Duties as it may be Indes Occidentales, excepté expedient to impose for the Regulation seulement tels Droits qu'il pourra être of Commerce, . . . nothing in this Act convenable d'imposer pour le contained shall extend, or be règlement du Commerce, […] rien construed to extend, to prevent or contenu dans cet Acte ne s'étendra, ou affect the Execution of any Law which ne sera entendu s'étendre à empêcher hath been or shall at any Time be ou affecter l'exécution d'aucune Loi qui made by his Majesty, his Heirs or a été ou qui sera faite en aucun tems Successors, and the Parliament of par sa Majesté, ses Héritiers ou Great Britain, for establishing Successeurs, et le Parlement de la Regulations or Prohibitions, or for Grande Bretagne, pour établir des imposing, levying, or collecting Duties Réglemens ou Prohibitions, ou pour for the Regulation of Navigation, or for imposer, lever ou retirer des droits pour the Regulation of the Commerce to be le Règlement de la Navigation, ou pour carried on between the said two le Règlement du Commerce qui se fera Provinces, or between either of the entre les dites deux Provinces, ou said Provinces and any other Part of entre l'une ou l'autre des dites his Majesty's Dominions, or between Provinces, et aucune autre partie des either of the said Provinces and any Territoires de sa Majesté, ou entre foreign Country or State, ... l'une ou l'autre des dites Provinces et [Emphasis added.] aucun Pais ou État Etranger […]  The same clause appeared in section XLIII of the Act of Union, 1840. As far as Tremblay was concerned, this was the interpretation which was to be given to 234 Constitution Act, 1791, supra, footnote 204 at 22. No.: 200-09-006746-090 PAGE: 55 subsection 92(2) of the Constitution Act, 1867, that is, trade involving at least two provinces, to respect the intention of the constituents to confer on Parliament by this [TRANSLATION] ―commercial clause,‖ jurisdiction over matters [TRANSLATION] ―of common interest to all the provinces.‖235  This interpretation was adopted by the Privy Council, subject to the openness it showed for a broader interpretation. In Parsons, which I dealt with earlier, Sir Montague Smith defined the content of this matter as follows: Construing therefore the words "regulation of trade and commerce" by the various aids to their interpretation above suggested, [TRANSLATION] [that is, the presence of other matters in section 91 which would have otherwise been necessary and the use of this expression in the Act of Union], they would include political arrangements in regard to trade requiring the sanction of parliament, regulation of trade in matters of inter-provincial concern, and it may be that they would include general regulation of trade affecting the whole dominion.236 [Emphasis added.]  Accordingly, two categories, which were to be developed by case law, were created: the regulation of interprovincial and national trade and commerce, and the general regulation of trade within the country. I will now conduct an in-depth analysis of each of them. a) Interprovincial and international trade  A series of Privy Council judgments reflects the decentralization tendency which we have already mentioned. In the reference In Re The Insurance Act of Canada, Alberta impugned the validity of the Insurance Act, 1910, which provided for the regulation of insurance contracts by the federal government. Viscount Haldane ruled that jurisdiction over interprovincial trade does not allow the regulation of an industry that has interprovincial transactions, no matter how important it may be. He noted that where the constituents wished to derogate from that rule, they did so explicitly: Their Lordships think that as the result of these decisions it must now be taken that the authority to legislate for the regulation of trade and commerce does not extend to the regulation by a licensing system of a particular trade in which Canadians would otherwise be free to engage in the provinces. . . . No doubt the business of insurance is a very important one, which has attained to great dimensions in Canada. But this is equally true of other highly important and extensive forms of business in Canada which are today freely transacted under provincial authority. Where the British North America Act has taken such forms of 235 Tremblay, supra, footnote 202 at 135–137. 236 Parsons, supra, footnote 19 at 113, translation from National Transportation, supra, footnote 217 at 257. No.: 200-09-006746-090 PAGE: 56 business out of provincial jurisdiction, as in the case of banking, it has done so by express words which would have been unnecessary had the argument for the Dominion Government addressed to the Board from the Bar been well founded.237 [Emphasis added.]  The Supreme Court adopted a similar position in The King v. Eastern Terminal Elevator Co. regarding legislation regulating agricultural trade.238 Although most Canadian cereals are consumed in provinces other than where they are produced, Justice Duff, then a puisne judge, considered that the scheme of grain elevator permits and regulation under the jurisdiction of the Board of Grain Commissioners for Canada dealt with work of a local nature, which was subject to provincial jurisdiction under subsection 92(16) of the Constitution Act, 1867. He added that a contrary approach would allow Parliament to regulate almost all intraprovincial trade on the basis of the fact that part of it, no matter how small, is destined to extra-provincial trade. He also dismissed the argument to the effect that the implementation of such a federal scheme would be part of the federal residuary jurisdiction, as the provinces, acting jointly, would not have the jurisdiction to obtain the same result. According to him, the inability of Parliament or of a provincial legislature to enact specific legislation must not necessarily be resolved by transferring jurisdiction from one to the other: [I]n a system involving a division of powers such as that set up by the British North America Act, it may often be that subsidiary legislation by the provinces or by the Dominion is required to give full effect to some beneficial and necessary scheme of legislation not entirely within the powers of either.239  The Privy Council rendered similar judgments in Reference re Natural Products Marketing Act240 and Reference re Margarine.241 In the first judgment, Lord Atkin was of the opinion that a natural products marketing scheme under the administration of a Dominion Marketing Board was ultra vires Parliament‘s jurisdiction over interprovincial trade because it encroached on provincial jurisdiction over property and civil rights. The provisions specifically dealing with interprovincial trade and criminal penalties were also ruled to be ultra vires because they were indistinguishably linked to the legislation in question.242 In the second judgment, the section of the Dairy Industry Act which prohibited the production of and trade in margarine to protect the dairy industry was ruled to be ultra vires Parliament‘s jurisdiction over interprovincial trade and commerce. Lord Morton of Henryton repeated the analysis in Reference re Natural Products Marketing Act to dismiss the argument based on the regulation of trade and commerce. 237 Attorney-General for Canada v. Attorney-General for Alberta (Insurance Reference),  1 A.C. 588, 597. 238 The King v. Eastern Terminal Elevator Co.,  S.C.R. 434. (hereafter ―Eastern Terminal Elevator”). 239 Ibid., 448. 240 Reference re Natural Products Marketing Act,  A.C. 377. 241 Reference re Validity of Section 5(a) of the Dairy Industry Act,  A.C. 179. (hereafter ―Reference re Margarine”). 242 Reference re Natural Products Marketing Act, supra, footnote 240 at 389. No.: 200-09-006746-090 PAGE: 57 He also dismissed the argument based on federal jurisdiction over criminal law, identifying the pith and substance of the Act as being ―the protection and encouragement of the dairy industry in Canada.‖243 As Hogg noted, this judgment should not, however, be interpreted as denying the existence of federal regulatory power over imports under subsection 91(2) of the Constitution Act, 1867, which was acknowledged by the Supreme Court in this case.244  In Caloil Inc. v. Attorney General of Canada,245 the constitutionality of the National Energy Board was challenged on the basis of the fact that it encroached on provincial jurisdiction over the regulation of local trade. The Act prohibited transporting imported gasoline farther east than a given point in Ontario. Justice Pigeon of the Supreme Court ruled that the pith and substance of the legislation was the administration of an extra-provincial marketing program regarding gasoline imports and that it was valid in spite of its effects on the gasoline industry within a province.246  In Reference re Agricultural Products Marketing247 and in Fédération des producteurs de volailles du Québec v. Pelland,248 the Supreme Court ruled on the validity of legislation enacted regarding plans implemented through a Grant of Authority by both levels of government to an administrative organization. In the first case, the federal egg marketing program, which allowed the Canadian Egg Marketing Agency to establish quotas applicable to interprovincial as well as to intraprovincial trade, regulating the possession of egg producing hens and establishing various levies, was ruled to be intra vires by the Supreme Court. On the contrary, in the second judgment, the Court ruled that the provincial Act could establish production quotas affecting goods for interprovincial trade. In both cases, the Court took into consideration the fact that the schemes were implemented following intergovernmental agreements and a delegation of administrative powers before legitimizing jurisdictional encroachment in situations of ―cooperative federalism‖. Justice Abella underlined the special feature of this type of situation as follows: In my view, the 1978 Federal-Provincial Agreement, like the scheme in the Egg Reference, both reflects and reifies Canadian federalism's constitutional creativity and cooperative flexibility.249  In Dominion Stores Ltd. v. R.,250 the Court assessed the constitutionality of the Canada Agricultural Standards Act, which imposed certain quality standards on products bearing the ―Canada Extra Fancy‖ quality grade, even if they were to be sold 243 Reference re Margarine, supra, footnote 241 at 192. 244 Hogg, supra, footnote 17 at 20–5. 245 Caloil Inc. v. Attorney General of Canada,  S.C.R. 543. 246 Ibid. at 551. 247 Reference re Agricultural Products Marketing,  2 S.C.R. 1198. 248 Fédération des producteurs de volailles du Québec v. Pelland,  1 S.C.R. 292, 2005 SCC 20. 249 Ibid. at para. 15. 250 Dominion Stores Ltd. v. R.,  1 S.C.R. 844. (hereafter ―Dominion Stores”) No.: 200-09-006746-090 PAGE: 58 locally. In referring to the Parsons and Eastern Terminal Elevator judgments, Justice Estey concluded that the Act did not apply in this case. He ruled that federal jurisdiction did not extend to goods in intraprovincial trade, which was of provincial jurisdiction under subsections 92(13) and 92(16) of the Constitution Act, 1867. Even if he admitted that the interaction between subsection 91(2) and provincial jurisdiction over local trade could possibly change,251 he distinguished the conflict between the federal and the provincial acts which was submitted to him from the preceding marketing cooperation initiatives.252  In Labatt Breweries Canada Ltd. v. Attorney General of Canada, the Court ruled on the validity of federal regulations dealing with the labelling of light beer enacted under the Food and Drugs Act. It was submitted that the regulations were valid under the federal power over criminal matters, trade and commerce, and peace, order and good government. Justice Estey reviewed the case law dealing with interprovincial trade and commerce and ruled that it did not apply in this case as the interprovincial aspect of the distribution of beer had not been established.253  Finally, although Multiple Access dealt with federal jurisdiction over the incorporation of business corporations, Justice Dickson, then a puisne judge, made the following comment and suggested that it was not impossible to establish Parliament‘s jurisdiction regarding the regulation of securities under its power of regulation of interprovincial and international trade and commerce: Parliament has not yet enacted any comprehensive scheme of securities legislation. To date the Canadian experience has been that the provinces have taken control of the marketing of securities, differing in this respect from the United States where the Securities and Exchange Commission has regulated trading and primary distribution of securities. I should not wish by anything said in this case to affect prejudicially the constitutional right of Parliament to enact a general scheme of securities legislation pursuant to its power to make laws in relation to interprovincial and export trade and commerce. This is of particular significance considering the interprovincial and indeed international character of the securities industry.254 [Emphasis added.]  Dissenting, Justice Estey, seems to take the same approach: Counsel for the Attorney General for Canada did not wish to found the validity of these sections upon an independent claim that, by reason of the potential extra- provincial nature of securities trading, they could be sustained by the authority of 251 Ibid. at 866. 252 Ibid. at 864. 253 Labatt Breweries of Canada Ltd. v. Attorney General of Canada,  1 S.C.R. 914, 939. (hereafter ―Labatt Breweries”) 254 Multiple Access, supra, footnote 15 at 173–174. No.: 200-09-006746-090 PAGE: 59 s. 91(2) alone. I venture to say that there will be more and more challenges in the future to the dominant position now occupied by the securities exchange authorities of the province in which the major stock exchange of the country is located. As the magnitude and number of multi-provincial security transactions increase the strain on the present unbalanced regulatory system will mount. It remains to be seen whether this will precipitate a change in the national appreciation of constitutional requirements and federal legislative policy. Until such a development occurs the disposition of this appeal must be found in the light of the positions herein taken by the parties. [Emphasis added.]  An overview of case law shows that Parliament does not have the necessary jurisdiction to implement a unique scheme regulating both intraprovincial and interprovincial trading. Quite the contrary, the Supreme Court has shown that it is favourable to cooperative arrangements between governments, following agreements and delegation of powers for the purposes of a single scheme dealing with all aspects of trade in a specific industry. The determining indicium, as it appears from the Dominion Stores and Labatt Breweries judgments, is physical evidence of the local or interprovincial dimension of the targeted trade.  Finally, I underline the fact that in its interprovincial and international aspects only, trading in securities is possibly of federal jurisdiction over trade. Professor Leclair, like Professors Henri Brun, Guy Tremblay, and Eugénie Brouillet255 underline the fact that such a [TRANSLATION] ―complementary‖ scheme may be considered and be justified under the principle of subsidiarity. He paraphrased the proposal made by Cédric Sabbah, attorney: Provinces would remain competent as regards the protection of investors and public protection, while Parliament would be endowed with the power to regulate matters having crossborder, i.e., extraprovincial aspects. That category would comprise matters such as the regulation of stock exchanges, hub of all sorts of interprovincial and international transactions. Representation of Canada in international forums and authority to negotiate international agreements would also fall in the federal lap. Finally, Sabbah argues for a federal power to establish minimal standards that provinces would have to integrate to their own sets of rules so as to prevent the dreaded ―race to the bottom‖ and also, more importantly, because Ottawa is the only level of government that can legitimately claim a right to determine where the national public interest lies — the public interest being the guiding principle of all 13 securities regulators.256  The AGC does not submit that the proposed Act may be validly enacted under this first branch of subsection 92(13) of the Constitution Act, 1867. In any event, this 255 Brun, Tremblay & Brouillet, supra, footnote 17 at 514. 256 Jean Leclair, ―‘Please, Draw Me a Field of Jurisdiction‘: Regulating Securities, Securing Federalism,‖ (2010) 51 S.C.L.R. (2d) 556 at 565–566. (―Leclair‖) No.: 200-09-006746-090 PAGE: 60 could not have been the necessary basis for the enactment of the proposed Act, considering that in its pith and substance, its scope goes far beyond the limits of this power. b) General jurisdiction  One of the examples of federal jurisdiction over trade and commerce in general, which is acknowledged by case law, is the regulation of business corporations. In the Privy Council judgment of John Deere Plow Co. v. Wharton, Viscount Haldane stated that if the power to incorporate business corporations was granted to Parliament, the way in which their activities was to be exercised would become a matter of general interest for the whole Dominion: …the power to regulate trade and commerce at all events enables the Parliament of Canada to prescribe to what extent the powers of companies the objects of which extend to the entire Dominion should be exercisable, and what limitations should be placed on such powers. For if it be established that the Dominion Parliament can create such companies, then it becomes a question of general interest throughout the Dominion in what fashion they should be permitted to trade.257 [Emphasis added.]  In Vapor Canada, discussed above, Chief Justice Laskin ruled on the content of the second branch of jurisdiction over trade and commerce established in Parsons. In the following paragraph, he established the basis of the indicia that case law subsequently used: One looks in vain for any regulatory scheme in s. 7, let alone s. 7(e). Its enforcement is left to the chance of private redress without public monitoring by the continuing oversight of a regulatory agency which would at least lend some colour to the alleged national or Canada-wide sweep of s. 7(e). The provision is not directed to trade but to the ethical conduct of persons engaged in trade or in business, and, in my view, such a detached provision cannot survive alone unconnected to a general regulatory scheme to govern trading relations going beyond merely local concern. Even on the footing of being concerned with practices in the conduct of trade, its private enforcement by civil action gives it a local cast because it is as applicable in its terms to local or intraprovincial competitors as it is to competitors in interprovincial trade.258  The Chief Justice restated these indicia in Re Anti Inflation Act shortly thereafter259 and would have been ready to acknowledge jurisdiction over trade in 257 John Deere Plow Co. v. Wharton,  A.C. 330, 340. ( ―John Deere Plow”) excerpt taken from Labatt Breweries, supra, footnote 253 at 940. 258 Vapor Canada, supra, footnote 20 at para. 165. 259 Reference re: Anti-Inflation Act, supra, footnote 36 at 426–427. No.: 200-09-006746-090 PAGE: 61 general in his dissenting reasons in Labatt Breweries.260 In this same judgment, Justice Estey also dealt with the regulation of trade and commerce in general and affirmed that the guiding indicium was still the one stated in John Deere Plow, that is, ―a question of general interest throughout the Dominion‖.261 He noted that ―neither national ownership of a trade or undertaking or even national advertising of its products will alone suffice to authorize the imposition of federal trade and commerce regulation‖.262 He added on the basis of Justice Duff‘s dissent in Reference re Board of Commerce Act,263 that this matter does not confer jurisdiction on Parliament to regulate a large number of ―the contracts of a trade in one commodity‖ if it does not have jurisdiction over such trading taken individually.264  In National Transportation, the Supreme Court studied a section of the Combines Investigation Act which empowered the Attorney General of Canada to undertake prosecutions for conduct that hindered competition. It was submitted that this section encroached on provincial jurisdiction over the administration of justice granted under subsection 92(14) of the Constitution Act, 1867. Justice Dickson, then a puisne judge, was of the opinion that the section in question could be enacted by Parliament under its jurisdiction over criminal law as well as over the regulation of trade and commerce in general. As far as this last matter was concerned, Justice Dickson began by affirming that ―the limits of s. 91(2) are not fixed, and that questions of constitutional balance play a crucial role in determining its extent in any given case at any given time.‖ 265 After a detailed review of case law, he made the following distinction between the regulation of local trade and general trade: The reason why the regulation of a single trade or business in the province cannot be a question of general interest throughout the Dominion, is that it lies at the very heart of the local autonomy envisaged in the Constitution Act, 1867. That a federal enactment purports to carry out such regulation in the same way in all the provinces or in association with other regulatory codes dealing with other trades or businesses does not change the fact that what is being created is an exact overlapping and hence a nullification of a jurisdiction conceded to the provinces by the Constitution. A different situation obtains, however, when what is at issue is general legislation aimed at the economy as a single integrated national unit rather than as a collection of separate local enterprises. Such legis- lation is qualitatively different from anything that could practically or constitutionally be enacted by the individual provinces either separately or in combination. The focus of such legislation is on the general, though its results will obviously be manifested in particular local effects any one of which may 260 Labatt Breweries, supra, footnote 253 at 919. 261 Ibid. at 940. 262 Ibid. at 941. 263 Reference re Board of Commerce Act, (1920), 60 S.C.R. 456. 264 Labatt Breweries, supra, footnote 253 at 942. 265 Ibid. at 259. No.: 200-09-006746-090 PAGE: 62 touch upon "Property and Civil Rights in the Province". Nevertheless, in pith and substance such legislation will be addressed to questions of general interest throughout the Dominion. The line of demarcation is clear between measures validly directed at a general regulation of the national economy and those merely aimed at centralized control over a large number of local economic entities.266 [Emphasis added.]  Justice Dickson suggested adding two other ―even surer‖ indicia to the three identified by Justice Laskin in Vapor Canada, that is, the constitutional inability to enact such legislation, jointly or separately, and the fact that not including even one province would compromise the application of the law.267  In General Motors, Chief Justice Dickson, writing for a unanimous bench, confirmed the five indicia regarding general federal jurisdiction over trade and commerce which he had proposed in National Transportation.268 City National Leasing alleged that General Motors of Canada had infringed the Combines Investigation Act by offering its competitors preferred interest rates and it intended to undertake a civil recourse that was provided under that Act. It was alleged in answer that the Act in general and the section providing the recourse were ultra vires Parliament‘s jurisdiction because the sale and financing contracts were executed in one province. On the contrary, the judge concluded that the federal government has the jurisdiction required to establish rules which also apply to intraprovincial trade to the extent necessary to establish a federal competition scheme. After having specified that the five indicia were not exhaustive and that they must not necessarily all be present, he summarized his analysis as follows: In sum, the Combines Investigation Act is a complex scheme of competition regulation aimed at improving the economic welfare of the nation as a whole. It operates under a regulatory agency. It is designed to control an aspect of the economy that must be regulated nationally if it is to be successfully regulated at all.269  Finally, in Kirkbi, Justice LeBel applied the indicia established in General Motors to the constitutional validity of civil recourse to claim an unregistered trade-mark provided under the Trade-Marks Act. It was submitted that this was ultra vires Parliament‘s jurisdiction. Justice LeBel concluded that the provision could be validly enacted under federal jurisdiction over trade and commerce in general. He wrote the following restatement of the non-exhaustive list of applicable indicia: 266 Ibid. at 267. 267 Ibid. at 268. 268 See also Quebec Ready Mix Inc. v. Rocois Construction Inc.,  1 S.C.R. 695, rendered for the same reasons as General Motors. 269 General Motors, supra, footnote 11 at para. 65. No.: 200-09-006746-090 PAGE: 63 i) the impugned legislation must be part of a regulatory scheme; (ii) the scheme must be monitored by the continuing oversight of a regulatory agency; (iii) the legislation must be concerned with trade as a whole rather than with a particular industry; (iv) the legislation should be of a nature that provinces jointly or severally would be constitutionally incapable of enacting; and (v) the failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country…270  Without conducting an individual analysis of the five indicia, Justice LeBel concluded that the applicability of the Trade-marks Act would be compromised by the existence of a provincial recourse which is not harmonized with the rest of the Act, thereby making the implementation of a federal scheme necessary: The protection of unregistered trade-marks is integral to the legitimacy, legal standards and efficacy of registered trade-marks. The Trade-marks Act is clearly concerned with trade as a whole, as opposed to within a particular industry. There is no question that trade-marks apply across and between industries in different provinces. Divided provincial and federal jurisdiction could mean that the provincial law could be changed by each provincial legislature. This could result in unregistered trade-marks that were more strongly protected than registered trade-marks, undermining the efficacy and integrity of the federal Parliament's Trade-marks Act. The lack of a civil remedy integrated into the scheme of the Act, applicable to all marks, registered or unregistered, might also lead to duplicative or conflicting and hence inefficient enforcement procedures. . . .271 [Emphasis added.]  On the basis of the above, I conclude that the application of the second branch of federal jurisdiction over trade and commerce cannot be separated from the quest for a constitutional balance. Considering the possibility of encroachment on fields of jurisdiction specifically granted to the provincial legislatures, the main indicium is the regulation of a matter of general interest to the whole country. Regarding economic issues, the statute should use a national and integrated approach rather than target a series of local and distinct enterprises. To this must be added the five indicia applied in Kirkbi, which are basically used to determine if Parliament‘s intervention in this matter is necessary. In the following section, I will analyze the proposed Act on the basis of these five indicia. c) Application to this case 270 Ibid. at para. 17. 271 Ibid. at para. 29. No.: 200-09-006746-090 PAGE: 64 i. General scheme of regulation and supervision by a regulatory organization  The parties do not contest the fact that the proposed Act meets the first two Kirkbi indicia and I will therefore deal with them briefly. The proposed Act encompasses all actors in the securities market and applies rules of conduct to them. The rules are developed and enforced by one organization, the Authority. It is therefore a general and complete regulatory system, similar to the securities legislation in force in the other provinces and territories of the country. The Hocking Report in fact underlines that the appended draft bill, which is the subject of the first constitutional question submitted to this Court, is [TRANSLATION] ―substantially influenced‖ by this legislation.272 The proposed Act is very similar. ii. Trade in general  The characterization of the securities regulatory scheme in the proposed Act as being part of trade in general or of a specific sector, is a question of fact. In this section, I reach the conclusion that the latter better corresponds to reality.  The expression ―general regulation of trade‖ used in Parsons by Sir Montague Smith is abstract. More than merely imposing taxes on foreign trade as was contemplated in the Act of Union, 1840, case law has broadened its application to trade involving all sectors of activity of the various provinces rather than to one specific industry.273 This indicium could also be re-worded by affirming that the law must apply to the economy as a single integrated national unit.274 I will however deal with the national scope indicium during the analysis of the fourth indicium, that is, provincial inability to establish a similar scheme.  The Office québécois de la langue française [the Quebec French Language Regulatory Body] defines the expression [TRANSLATION] ―area of activity‖ as follows: [TRANSLATION] All enterprises of a similar nature, which produce similar goods or supply similar services which are part of the same category.275  The Translation Bureau of Canada provides the following definition under the French entry for ―industry:‖ [TRANSLATION] All enterprises which produce a given category of goods or services, for example, steel mills, textiles, petroleum industry and insurance.276 272 Hockin Report, supra, footnote 104, A.G.Q. at 561. 273 Kirkbi., supra, footnote 12 at para. 29. 274 National Transport, supra, footnote 217 at 267 and General Motors, supra, footnote 11 at para. 65. 275 The Grand dictionnaire terminologique, Office québécois de la langue française, ―area of activity.‖ 276 Termium Plus, Translation Bureau of Canada, Public Works and Government Services Canada ―industry‖ No.: 200-09-006746-090 PAGE: 65  Trading in securities is a special industry. The persons targeted by the proposed Act offer goods and services which are all part of the same category. Accordingly, issuers of securities, intermediaries, (including brokers, self-regulatory bodies, stock markets), and other actors (including rating organizations, investor compensation funds) are subject to regulatory requirements and to standards of conduct that have the same main objective: ensuring the protection of investors in the securities market. Issuers of securities obviously do business in various areas but all the other targeted persons deal only in the securities market. Conversely, it cannot be said that the persons targeted by competition and trade- marks do business in the ―field of competition‖ or in the ―field of trade-marks.‖  In Labatt Beweries, Justice Estey cited with approval the reasons given by Justice Duff in his dissent in Reference re Board of Commerce Act. As far as he was concerned, the regulation of contracts is part of general trade if they concern a series of products that, if taken and regulated individually, are not part of trade in general: I cannot discover any principle consistent with [the Parsons Case], upon which an enactment delegating to a commission the authority to regulate the terms of particular contracts of individual traders in a specified commodity . . ., can be sustained as an exercise of that power; and if such legislation could not be supported when the subject dealt with is a single commodity, or the trade in a single commodity, or a single group of commodities, how can jurisdiction be acquired so to legislate by extending the scope of the legislation and bringing a large number of specified trades or commodities within its sweep? Every consideration which can be invoked in support of the view that the authority to regulate by general regulations of uniform application the contracts of a trade in one commodity, does not fall within section 91-(2), can properly be brought to bear with I think increased force in impeaching legislation of the character now in question.277 [Emphasis added.]  This reasoning is applicable to the present case. Contracts for security entitlements, contracts for the services of intermediaries, rules established by acknowledged and designated organizations, rules of conduct that apply to intermediaries, rules governing takeover and issuer bids, and so on, are all individually subject to provincial jurisdiction under subsection 92(13) of the Constitution Act, 1867. Merely grouping them under the proposed Act does not suffice to make them valid.  Accordingly, although they have an impact on the economy as a whole, I find that the regulation of securities does not concern trade in general but transactions which are specific to a given industry and that the third indicium developed by case law has not been complied with. 277 Reference re Board of Commerce Act, 503–504. No.: 200-09-006746-090 PAGE: 66 iii. Provincial inability  The forth indicium developed by case law provides that the law is such that the provinces are jointly or separately constitutionally unable to enact it. It applies the principle according to which, in order to be valid, a law must target the economy as a single national integrated unit278 and improve the economic welfare of the nation as a whole.279 Justice Dickson, then a puisne judge, issued a warning against initiatives, the purpose of which is to centralize local economic entities under the pretext of encompassing the national economy: The line of demarcation is clear between measures validly directed at a general regulation of the national economy and those merely aimed at centralized control over a large number of local economic entities.280  I add that we must be careful to distinguish the issue of the provinces‘ inability to effectively regulate the securities industry from the issue of the efficiency of their action. I am of the opinion that the proposed Act also fails on this indicium, which I will assess on four different bases. A) Lack of harmonization  The experts for the ABC and the AGA submitted that the current securities regulatory scheme is not sufficiently harmonized and it accordingly entails additional costs, irregular enforcement, and levelling down of regulation.  It is undeniable that the information technology revolution has led to the nationalization and internationalization of the securities market. Justice Iacobucci clearly noted it in Global Securities281 and the recent initiatives for the amalgamation of the stock markets of Australia and Singapore, of London and Toronto, or of New York and Frankfurt are additional examples.282 On the Canadian scene, Milne noted that a significant number of issuers had been registered in more than one province or with foreign stock markets. Wroebel added that a small number of banks are now major players in the brokerage field and in the participation in mutual investments funds throughout the country. Gregory dealt with the application of Quebec law to a broker dealing with customers outside of the province and in Multiple Access, Justices Dickson and Estey underlined the fact that the interprovincial aspect of trading in securities could possibly justify federal jurisdiction in this area. 278 National Transportation, supra, footnote 217 at 267. 279 General Motors, supra, footnote 11 at para. 65. 280 National Transportation, supra, footnote 217 at 267. 281 Global Securities, supra, footnote 16 at para. 28. 282 Éric Desrosiers, Mouvement de fusions des Bourses dans le monde - Francfort et New York négocient à leur tour, Le Devoir, February 10, 2011, http://www.ledevoir.com/economie/actualites- economiques/316462/mouvement-de-fusions-des-bourses-dans-le-monde-francfort-et-new-york-. No.: 200-09-006746-090 PAGE: 67  As far as competition and trade-marks are concerned, the Supreme Court has ruled that our economic system could not tolerate a legal discrepancy from one province to another. The situation is exactly the contrary as far as securities are concerned.  As Spink noted, our system is based on an indirect holding system under which rights to securities are created and extinguished without the property thereto having to be exchanged. According to the theory developed by the economist R.H. Coase, the objective is to reduce the number of securities transactions, to transfer the cost of execution and risks to intermediaries, and, ultimately, to reduce transaction costs.283 Accordingly, large clearing agencies such as the Canadian Depository for Securities Limited hold the vast majority of securities using nominees, such as CDS Clearing and Depository Services Inc. Clearing houses create intermediary title to securities for the benefit of a reduced number of direct participants (banks, trust companies, and securities brokers), who in turn create intermediary title for the benefit of their clients.  When a client ―purchases‖ a share from his broker located in another province and when this share comes from an issuer located in a third province, the share in question does not change hands. A clearing house becomes the owner of the share in question, creates an intermediary title for the benefit of the intermediary, who creates one for the client‘s benefit. This chain of contract relationships may be interprovincial in some cases but it is quite properly regulated under the private law of the various provinces. In fact, intermediary title of ownership of a share is generally enforceable against the sole intermediary with whom its holder transacted, thereby avoiding conflict of laws and better assessing the risks: This characteristic makes the security entitlement particularly competent in dealing with cross-border transactions involving multiple intermediaries. It compartmentalizes the obligations between particular entitlement holders and their securities intermediary, using privity to separate the obligations at each tier of the indirect holding system. Privity is a triad linking involving two parties (the securities intermediary and entitlement holder) and a system of law. With clear and certain conflict of law rules, each security entitlement can be isolated and precisely assessed for risk management purposes.284 [Emphasis added.]  Even in transactions between the United States and Canada, clearing houses prefer to create and cancel intermediate title between themselves rather than transfer ownership to each other. This has two consequences. First, this method of structuring transactions means that a significant portion of trading in securities is intraprovincial, even if those transactions are part of the tendency to invest at a national level. Provincial private law is certainly able to regulate these transactions. Finally, according to Spink‘s analysis, this method does not create any problems of efficiency or cost because it enables to precisely determine which law applies. 283 Spink, supra, footnote 137, A.G.A. at 352. 284 Ibid. at 363. No.: 200-09-006746-090 PAGE: 68  Finally, I cannot do otherwise but deal with the passport scheme established following an agreement in principle which dates from 2004. This agreement, which was entered into freely by all the provinces and territories, except for Ontario, allows standardizing numerous procedures and automatically acknowledging the decisions made by what is called a primary regulator in the other provinces. Rousseau is of the opinion that even if the provincial framework remains to be perfected, it is not established that regulatory centralization would be better.285 Rice is of the opinion that it is one of the most efficient in the world and is highly harmonized because of the work accomplished by the CSA.286 Trebilcock admitted that a single scheme would not compensate for all the current shortcomings, but he considered that it would be an improvement.287  It is obvious that the experts are divided on the issue as to what type of scheme, centralized or decentralized, allows for an optimum regulation of the securities market. It has not been established, however, that the absence of harmonization of the current scheme is such that it makes the provinces unable to attain the three main objectives stated by the IOSCO in 1998,288 that is, the protection of investors, the establishment of fair, efficient and transparent markets, and the reduction of systemic risks. I will deal with this third objective in detail in the next section. Though the harmonization of the current scheme established by the provinces may well be one of the objectives of the proposed Act, its present condition does not allow me to conclude that the provinces are unable in this area. B) Prevention of systemic risks  Advocates of the proposed Act claim that the prevention of systemic risks justifies its enactment under federal jurisdiction over trade and commerce in general. They consider that a fragmented system cannot rapidly deal with a crisis or even with a change in policy of a foreign securities regulatory body. Trebilcock affirmed that a single national securities regulator ―will in all likelihood be more flexible and expeditious in developing new policies to meet emerging challenges in capital markets‖ and would ―facilitate coordination with other Canadian financial sector regulators.‖289 Milne is also of the opinion that the current system has shortcomings in connection with market complexity and requires better coordination.290  Two reasons convince me to dismiss this position. First, the prevention of systemic risks is above all part of prudential regulation, which is ensured by the Bank of Canada and the Office of the Superintendant of Financial Institutions Canada. The 285 Rousseau, supra, footnote 125, A.G.Q. at 1208. 286 Rice, supra, footnote 98, A.G.Q. at 37–38. 287 Trebilcock, supra, footnote 116, A.G.C. at 413. 288 Corcoran, supra, footnote 133, A.G.Q. at 1684–1985. 289 Trebilcock, supra, footnote 116, A.G.C. at 370 to 372. 290 Milne, supra, footnote 111, A.G.C. at 271. No.: 200-09-006746-090 PAGE: 69 Translation Bureau of Canada suggests the following definition for the notion of ―prudential regulation:‖ [TRANSLATION] These rules are applied by monetary and government authorities, the purpose of which is to reinforce the security of financial systems and to equalize the conditions for the conduct of economic activities. Among others, they include a code of ethics and new standards of capital adequacy.291  These organizations have the specific duty of supervising financial institutions and private retirement plans and the contribution which may be made by a securities regulator, even a national one, is relatively limited.292 On the other hand, a committee called Heads of Agencies already exists to foster information exchange and the coordination of provincial securities regulators and these two organizations. The Governor of the Bank of Canada, the Superintendant of Financial Institutions of Canada., the Minister of Finance of Canada, and the securities commissions of Quebec, Ontario, Alberta, and British Columbia sit on this committee, which meets four times per year.293  Then, as Choi has noted, the objective of the prevention of systemic risks by the securities regulators is only indirectly attained by fulfilling their traditional mandate of regulating specific transactions: Many aspects of reducing systemic risk, however, do not require that securities regulators take a macro-level view of the economy but instead require securities regulators to take a more vigorous approach to fulfill their traditional mandate of the protection of investors and the integrity, efficiency, and transparency of the capital markets. Regulators focused on the transaction and capital market participant-level task of protecting investors and requiring disclosure and transparency for specific transactions will have the effect of reducing systemic risk. Micro-level activities—such as ensuring full disclosure for investors, the clearance and settlement of transactions (ensuring finality), the appropriate level of credit rating for securities sold in transactions, the transparency of derivatives market transactions, and the registration and disclosure of hedge funds involved in important market transactions—do not require regulators to take a national (or indeed international) perspective on aggregate systemic risk levels. . . . By simply ensuring that a specific investor in a specific transaction has adequate information on the risks associated with the transaction, securities regulators taking a micro-level focus will result in better pricing and investment decisions without having to take a nationwide perspective on systemic risk. 291 Termium Plus, Translation Bureau of Canada, Public Works and Government Services Canada, ―prudential regulation‖. 292 Choi, supra, footnote 131, A.G.Q. at 1523. 293 Rice, supra, footnote 98, A.G.A. at 33. No.: 200-09-006746-090 PAGE: 70 A national securities regulator would enjoy no particular advantage in taking a micro-level focus compared with provincial regulators.294 [Emphasis added, emphasis in the original.]  Spink is of the same opinion when he affirms: These mechanisms for reducing systemic and other risk are essentially the same as those used by stock exchanges in the 1800s: limiting participation to creditworthy members; setting limits on participants‘ exposure; requiring participants to post collateral to cover exposures; and default procedures.295  Therefore, without settling the debate between experts who examine if a centralized scheme is better than a decentralized one to avoid financial crises or not, I conclude that it has not been established that the current scheme implemented by the provinces is unable to reasonably prevent systemic risks. C) International representation  The AGC and the CBA also submitted that the provinces are unable to efficiently regulate the securities market because they are incompetent to represent Canada internationally. I do not believe that this argument in itself may justify the proposed Act, as international representation seems to me to be quite accessory to its real purpose.  In fact, I note that the current scheme did not prevent the CSA from implementing the Multi-Jurisdictional Disclosure System with the SEC and of being a member of numerous international associations and both the AMF and the Ontario Securities Commission participate in the IOSCO as voting members and the securities regulators of Alberta and British Columbia participate as associate members.296  Above all, it is in the very nature of a federalist and dualist State such as ours, that one level of government cannot bind another level internationally. This principle was clearly established by Lord Atkin in re Weekly Rest in Industrial Undertakings Act: In a unitary State whose Legislature possesses unlimited powers the problem is simple. Parliament will either fulfil or not treaty obligations imposed upon the State by its executive. The nature of the obligations does not affect the complete authority of the Legislature to make them law if it so chooses. But in a State where the Legislature does not possess absolute authority, in a federal State where legislative authority is limited by a constitutional document, or is divided up between different Legislatures in accordance with the classes of subject-matter submitted for legislation, the problem is complex. The obligations imposed by 294 Choi, supra, footnote 131, A.G.Q. at 1526–1527. 295 Spink, supra, footnote 137, A.G.A. at 369. 296 Rice, supra, note 98, A.G.A. at 38-43. No.: 200-09-006746-090 PAGE: 71 treaty may have to be performed, if at all, by several Legislatures; and the executive have the task of obtaining the legislative assent not of the one Parliament to whom they may be responsible, but possibly of several Parliaments to whom they stand in no direct relation. The question is not how is the obligation formed, that is the function of the executive; but how is the obligation to be performed, and that depends upon the authority of the competent Legislature or Legislatures.297 [Emphasis added.]  Accordingly, the fact that the Government of Canada or a commission that it would create would be unable to impose international commitments on the provinces cannot be used as a justification for the Government of Canada to appropriate the legislative jurisdiction at stake. D) Criminal penalties  Under subsection 92(27) of the Constitution Act, 1867, Parliament has exclusive jurisdiction over criminal law.298 We underline the fact that the Criminal Code already provides for several general offences that apply to the field of securities: fraud,299 fraud by affecting the public market,300 fraudulent manipulation of stock exchange transactions,301 prohibited insider trading,302 gaming in stocks,303 broker reducing stock by selling for his own account,304 forgery,305 use of forged document,306 or false prospectus.307  Sections 158 to 166 of the proposed Act provide for new criminal offences and sentencing rules. They are based on a valid criminal law objective and the provinces have no jurisdiction to enact them. Existing provincial legislation only provides for offences that have been created under subsection 92(15) of the Constitution Act, 1867.308 297 Attorney-General for Canada v. Attorney-General for Ontario (re Weekly Rest in Industrial Undertakings Act),  A.C. 326, 348. 298 R. v. Hydro-Québec,  3 S.C.R. 213, at p. 244; RJR-MacDonald Inc. v. Canada (Attorney General),  3 S.C.R.199; Scowby v. Glendinning,  2 S.C.R. 226. 299 S. 380 (1) Cr. C. 300 S. 380 (2) Cr. C. 301 S. 382 Cr. C. 302 S. 382.1 Cr. C. 303 S. 383 Cr. C. 304 S. 384 Cr. C. 305 Ss. 366–367 Cr. C. 306 S. 368 Cr. C. 307 S. 400 Cr. C. 308 See, for example: Securities Act, R.S.Q. V-1.1, ss. 202 to 208.1 (Quebec); Securities Act, R.S.O., c. S.5, ss. 122 to 126.2 (Ontario); Securities Act, R.S.A. 2000, c. S-4, ss. 194 to 202 (Alberta); Securities Act, 1988, ss. 1988-89, c. S-42.2, ss. 131 to 136 (Saskatchewan); Securities Act, R.S.B.C. 1996, c. 418, ss. 155 to 165 (British Columbia). No.: 200-09-006746-090 PAGE: 72  The criminal provisions provided in the proposed Act are accessory to its pith and substance, which is the regulation of the conduct of traders in the securities market. Accordingly, in spite of the inability of the provinces to enact such provisions, it cannot be concluded that they are constitutionally unable to enact a regime which is identical to what is provided in the proposed Act.  Finally, as submitted by Leclair, the refusal of the provinces to implement one federal securities regulatory commission over the last century must not be confused with their inability to do so.309 After reading all the evidence which was submitted to us, I reach the conclusion that except for a central authority and the criminal penalties provided, it has not been shown that the provinces were constitutionally unable to adopt the scheme proposed by the federal government. iv. Requirement of unanimity  The fifth and last indicium consists in assessing whether the omission to include only one or several provinces in the proposed scheme would compromise its application in other parts of the country. Although the Hockin Report recommended the automatic repeal of provincial legislation within a period of two years,310 the proposed Act provides for the voluntary participation of the provinces. These provisions would replace provincial legislation of the provinces participating in the proposed Act only after receipt of the written consent of the Lieutenant Governor in Council of the province in question.311  The AGC affirmed that the government chose a voluntary participation procedure to respect the spirit of cooperative federalism but that the unanimous participation of the provinces was its ultimate goal. It is difficult to see in this mechanism anything other than an admission to the effect that the scheme could function without the participation of all the provinces or in spite of the withdrawal of a province that had participated for a certain period of time. This admission is even more obvious considering that it appeared to be quite probable when the proposed Act was published, that provinces such as Quebec and Alberta would prefer to remain on the sidelines of a national Canadian scheme.  In addition, contrarily to the schemes regarding competition or trade-marks, cohabitation of the proposed Act with the legislation of the provinces which decided not to participate can be easily considered. The regulatory aspect of the country would considerably resemble what currently exists, as the proposed Act would apply within the participating provinces and the other provinces would continue to be governed by their own legislation. It cannot therefore be said that the unanimous participation of the provinces is required to attain the targeted objectives under the proposed Act. 309 Leclair, supra, footnote 256 at 591. 310 Hockin Report, supra, footnote 104, A.G.C. at 813. 311 Proposed Act, supra, footnote 41, s. 250. No.: 200-09-006746-090 PAGE: 73 v. Finding on power over trade in general  On the basis of the preceding analysis, I reach the conclusion that the proposed Act is not of federal jurisdiction over the regulation of trade and commerce in general. Because it cannot be validly enacted under either of the two branches of subsection 91(2) of the Constitution Act, 1867, I therefore conclude that the proposed Act in general is ultra vires Parliament‘s jurisdiction. 5. Sections from the Budget Implementation Act, 2009  The sections of the Budget Implementation Act, 2009 which involve the question submitted by the Government of Quebec read as follows: Maximum payment of $150,000,000 Paiement maximal de 150 000 000 $ 295. (1) The Minister of Finance may 295. (1) Le ministre des Finances peut make direct payments, in an aggregate faire des paiements directs, jusqu‘à amount not exceeding $150,000,000, concurrence de cent cinquante millions to provinces and territories for matters de dollars, à des provinces et à des relating to the establishment of a territoires au titre de mesures liées à Canadian securities regulation regime l‘établissement d‘un régime canadien and a Canadian regulatory authority. de réglementation des valeurs mobilières et à la constitution d‘une Payments out of C.R.F. autorité administrative canadienne. (2) Any amount payable under this Paiements sur le Trésor section may be paid out of the Consolidated Revenue Fund, on the (2) À la demande du ministre des requisition of the Minister of Finance, at Finances, les sommes à verser au titre the times and in the manner, and on du présent article sont payées sur le any terms and conditions, that the Trésor, selon les conditions et Minister of Finance considers modalités — de temps et autres — qu‘il appropriate. estime indiquées. Agreements Accords 296. The Minister of Finance may enter 296. Le ministre des Finances peut into any agreement respecting conclure avec les provinces et les securities regulation with any province territoires des accords relatifs à la or territory. réglementation des valeurs mobilières. Canadian Securities Regulation Loi sur le Bureau de transition vers Regime Transition Office Act un régime canadien de réglementation des valeurs Enactment of Act mobilières 297. The Canadian Securities Édiction de la loi Regulation Regime Transition Office No.: 200-09-006746-090 PAGE: 74 Act is enacted as follows: 297. Est édictée la Loi sur le Bureau de transition vers un régime canadien de [See Canadian Securities Regulation réglementation des valeurs mobilières, Regime Transition Office Act] dont le texte suit : [Voir la Loi sur le Bureau de transition vers un régime canadien de réglementation des valeurs mobilières]  The general rule regarding severance of laws and the separability of two enactments as stated by Justice Sopinka in R. v. Morgentaler is that severance is available where the remaining good part of the law can survive independently. 312 A reading of sections 295 and 296 does not show that they will become invalid following this judgment. The Minister of Finance will remain empowered to make payments to the provinces and to enter into agreements with them for ―the establishment of a Canadian securities regulation regime and a Canadian regulatory authority.‖ A new regime could not however have the same form as the scheme contained in the proposed Act.  As far as section 297 is concerned, it must be understood on reading section 10 of the Canadian Securities Regulation Regime Transition Office Act which provides: Purpose Mission 10. The purpose of the Transition Office 10. Le Bureau de transition a pour is to assist in the establishment of a mission de concourir à l‘établissement Canadian securities regulation regime d‘un régime canadien de and a Canadian regulatory authority. réglementation des valeurs mobilières et à la constitution d‘une autorité administrative canadienne.  Once again, I reach the conclusion that section 297 and the Canadian Securities Regulation Regime Transition Office Act as a whole may survive independently from the proposed Act to the extent that they seek to implement ―a Canadian securities regulation regime and a Canadian regulatory authority,‖ that differs from a single Canadian regulatory authority such as the one contained in the proposed Act. I will therefore refrain from declaring them to be ultra vires Parliament‘s jurisdiction and invalid. V. CONCLUSION  For all these reasons, I answer the question submitted to our Court by the Government of Quebec affirmatively, subject to my remarks pertaining to the Budget Implementation Act, 2009 and the Canadian Securities Regulation Regime Transition Office Act, and to Parliament‘s jurisdiction to adopt the provisions of the proposed Act which are of criminal nature. 312 R. v. Morgentaler,  3 S.C.R. 463, p. 480. No.: 200-09-006746-090 PAGE: 75  The proposed Act‘s centralised approach regarding regulation of trading in securities may validly be pursued by the governments of this country if they so desire. Possible avenues include an act of Parliament that would complement provincial regimes and that would regulate interprovincial, international, and criminal aspects of trading in securities, a cooperative federal-provincial agreement, or a constitutional amendment.  On the contrary, the jurisprudence interpreting paragraph 91(2) of the Constitution Act, 1867 does not sustain implementing this endeavour without the consent of the provinces in cases where Parliament has not established their incapacity to regulate the part of the economic activity in question. To do so would hinder the federal compromise at the origin our country‘s creation. It would also threaten the balance of powers between the two levels of government, the continued existence of Quebec civil law and the durability of diversified common law in the other provinces and territories. J.J. MICHEL ROBERT, C.J. Q. No.: 200-09-006746-090 PAGE: 1 REASONS OF FORGET, BICH AND BOUCHARD JJ.A.  Under the circumstances described by Robert C.J. and Dalphond J.A. in their reasons for judgment, the Government of Quebec has referred the following question to our Court, which should be answered for the reasons given by our colleagues: [TRANSLATION] Are the provisions of the Proposed Canadian Securities Act, published by the Government of Canada on May 26, 2010, the essential purpose of which is to protect investors and regulate the securities industry, and the provisions to that effect set out in sections 295, 296 and 297 of the Budget Implementation Act 2009, S.C. 2009, c. 2, ultra vires the Parliament of Canada under the Constitution Act, 1867?1  The Minister of Finance of Canada intends to propose that Parliament enact a federal statute entitled the Securities Act, which would establish a complete securities regulation regime under a national Authority. The regime would apply throughout Canada, albeit as a result of a gradual opting in process by the provinces. The intention appears serious; sections 295 and 296 of the Budget Implementation Act 20092 already allow the Minister to make direct payments to provinces and territories for matters related to the establishment of the regime and to enter into agreements regarding securities regulation. Section 297 of the same Act3 enacts the Canadian Securities Regulation Regime Transition Office Act, whose mandate is to ―assist in the establishment of a Canadian securities regulation regime and a Canadian regulatory authority.‖4  In essence, the Attorney General of Quebec, with the support of his Alberta counterpart and the Barreau du Québec, submits that Parliament cannot validly enact the proposed regulatory regime which, overall, contains measures that clearly come within the powers granted to the provinces under section 92(13) of the Constitution Act, 1867. By way of exception, the Attorneys General of Quebec and Alberta concede that sections 158 to 168 of the Proposed Canadian Securities Act (―the proposed Act‖) would be valid under the federal criminal law jurisdiction. The Barreau du Québec 1 Order in Council 720-2010, August 25, 2010 (French only.) 2 S.C. 2009, c. 2. In the absence of any special provision, sections 295 and 296 of this Act came into force on March 12, 2009, when the Act was assented to. 3 Section 297 came into force on July 13, 2009, pursuant to the Order fixing July 13, 2009 as the date of the coming into force of section 297 of the Act (2009) 143 C. Gaz. II (July 8, 2009). 4 Section 10 of the Canadian Securities Regulation Regime Transition Office Act, S.C. 2009. c. 2, s. 297. No.: 200-09-006746-090 PAGE: 2 disputes this position, however, on the basis that they are simply ancillary to an otherwise unconstitutional regime.  The Attorney General of Canada, with the support of the Canadian Bankers Association, disagrees. He submits that the proposed Act is valid under section 91(2) of the Constitution Act, 1867, specifically with regards to the power over general trade and commerce. Further, he submits that sections 158 to 168 are valid under the federal criminal law jurisdiction according to section 91(27) of the Constitution Act, 1867.  Thus, the debate is quite clear. As we have seen, it essentially pits the jurisdiction granted by section 91(2) of the Constitution Act, 1867, against the jurisdiction granted by section 92(13) of the Constitution Act, 1867. I. Analysis 1. Preliminary remarks on the analytical approach  The analytical approach suitable in a case like this has frequently been reiterated by the Supreme Court of Canada. As Binnie J. succinctly explained in Chatterjee v. Ontario (Attorney General):5 16 The first step in a constitutional challenge is to determine ―the matter‖ (to track the language of the Constitution Act, 1867) in relation to which the impugned law is enacted. What is the essence of what the law does and how does it do it? ―[T]wo aspects of the law must be examined: the purpose of the enacting body, and the legal effect of the law‖ (Reference re Firearms Act, at para. 16). This exercise is traditionally known as determining the law‘s ―pith and substance‖. It may include not only the impugned Act but also external material surrounding its passage, including Hansard. In principle this assessment should be made without regard to the head(s) of legislative competence, which are to be looked at only once the ―pith and substance‖ of the impugned law is determined. Unless the two steps are kept distinct there is a danger that the whole exercise will become blurred and overly oriented towards results.6 ... 24 Once the ―pith and substance‖ is ascertained, it is necessary to classify that essential character of the law by reference to the provincial and federal ―classes of subjects‖ listed in ss. 91 and 92 (or, in an appropriate case, ss. 93, 94A and 95) to determine if the law comes within the jurisdiction of the enacting legislature. 5  1 S.C.R. 624. We have quoted the English version of Binnie J.‘s remarks because the French translation does not appear to be entirely accurate. 6 To the same effect, see Reference re Assisted Human Reproduction Act, 2010 SCC 61, per Chief Justice McLachlin, at par. 19. This is also the approach adopted by LeBel and Deschamps JJ. (under the headings A. Pith and Substance of the Impugned Provisions and B. Connecting the Pith and Substance of the Provisions with Heads of Power, and by Cromwell J.(paras. 284 and 287 of his reasons for judgment). No.: 200-09-006746-090 PAGE: 3  In the present case, unlike the Reference re Assisted Human Reproduction Act,7 there is no need for us to ask whether the ―pith and substance‖ analysis should begin with an examination of certain specific provisions of the proposed Act before we examine it in its entirety, or whether we should proceed in the reverse order. Indeed, the proposed Act as well as all its provisions, subject to the reservations set out above, are being challenged as well. Thus, subject to the exceptions that we will discuss later, it will not be necessary to examine them individually. In fact, the parties agree that the proposed Act envisages a complete securities regulation regime, which will either pass or fail the constitutional test.  Accordingly, we must begin by determining the pith and substance of the proposed Act, that is, its nature and its purpose. Thus, as Binnie J. notes in Chatterjee, supra, we must ask: ―What is the essence of what the law does and how does it do it?‖  Only afterward must we connect the ―matter‖ of the proposed Act with either one of the heads of power in the constitution, or perhaps more than one. Indeed, it is possible for some subjects or matters, depending on their aspects, to come within both federal and provincial jurisdiction at the same time. This is known as the double aspect doctrine, to which we will return to later. Moreover, it is possible for a matter that comes within the jurisdiction of one level of legislative authority to encroach on the other level‘s authority in a manner that is nonetheless valid by virtue of the ancillary powers doctrine, which requires the meticulous analysis laid out in detail by LeBel and Deschamps JJ. in the Reference re Assisted Human Reproduction Act.8  Lastly, as LeBel and Deschamps JJ. note, ―care must be taken to maintain the constitutional balance of powers at all stages of the constitutional analysis‖, 9 i.e., in the determination of the pith and substance, and its connection to a head of power.  On another subject, for the purposes of the analysis we intend to make limited use of the parties‘ extrinsic evidence, which largely deals with the efficiency and suitability of the proposed regime, notably from an economic perspective. We attempt to demonstrate, on one side, the practical advantages of a centralized and uniform regime that applies throughout Canada (such advantages undoubtedly exist) and, on the other side, the practical advantages of the current system, which is based on various provincial laws and a principle of inter-jurisdictional cooperation. Both perspectives can be defended, but it is understood that they are of limited assistance with regard to the distribution of powers. Nonetheless, this evidence has shown a certain number of specific and indisputable facts, which stand at the intersection of the parties‘ positions. We will allude to these facts at the appropriate time. 2. The pith and substance of the law: What is the essence of what the law does and how does it do it? 7 Supra note 6. 8 Ibid. at paras. 187-189. 9 Ibid. at par. 196. No.: 200-09-006746-090 PAGE: 4  In their respective reasons, Robert C.J. and Dalphond J.A. describe the proposed Act in depth and examine its provisions with care. Their conclusions regarding the pith and substance of the Act are as follows: Reasons of Robert C.J. [TRANSLATION]  In light of the above, it is my view that the federal government‘s purpose in the proposed Act is to make the Canadian securities regulatory regime more consistent, more effective, and better equipped to prevent the systemic risks that can threaten the financial system. I use the expression ―systemic risk‖ in the sense intended by Trebilcock in the following definition:: . . . the risk of default by one market participant will impact the ability of others to fulfil their legal obligations, setting off a chain of negative economic consequences that pervade an entire financial system. [Citation omitted.] …  Moreover, the proposed Act has the classic attributes of a schemeregulating the conduct of participants in the securities market. It governs issues on the primary market and transactions on the secondary market through various requirements (requirement to produce information and representations from issuers‘ insiders, recognition of intermediaries, designation of persons able to provide market participants with services, framework for take-over bids, prohibition of conduct intended to deceive the market, etc.) and provides for the respect of these requirements through criminal penalties and a series of civil remedies. I therefore conclude that the dominant characteristic, the main thrust, the pith and substance of the proposed Act is the regulation of the securities trade. Reasons of Dalphond J.A. [TRANSLATION]  Plainly, the proposed Act is a general scheme of securities legislation, within the meaning of Multiple Access. In light of the foregoing, I find that its pith and substance is the regulation of all the participants of what is to become a single, integrated Canada-wide market, characterized by essentially interprovincial and international transactions. I therefore agree with the Alberta Court of Appeal, per Slatter J.A., which stated the following at para. 14:  … The parties agree that the pith and substance of the proposed legislation is the regulation of the participants in the public capital markets in Canada, and transactions relating to the raising of capital. No.: 200-09-006746-090 PAGE: 5  The desired effects of the proposed Act, if it becomes law, are diverse: protection of investors (sporadic and ongoing information, prevention of fraud, competence of intermediaries, civil remedies), transparency in the securities market, standardization of rules, facilitation of access to capital, improvement of sanctions and minimization of systemic risks.  In reality, investor confidence is an important and even essential element in achieving the purpose of the proposed Act, preserving a vigorous capital market in Canada, which is needed to ensure that thousands of Canadian enterprises have access to financing other than bank financing so they will continue to contribute to the prosperity of the country and its population. ... If the proposed Act is passed by Parliament, the Government of Canada will have a significant tool for managing Canada‘s monetary and economic policy and will be able to ensure the stability of the capital market otherwise than by informal cooperation meetings with the existing provincial commissions.  To summarize, the proposed Act is part of an economic policy designed to preserve the capital market in Canada, a market that is now an integrated, single, cross-Canada market characterized by essentially extraprovincial transactions, by regulating market participants and transactions. That is its pith and substance, and we must avoid confusing that with the methods chosen for achieving it, which in fact cannot help but resemble the methods used by the provinces and elsewhere in the world.  Despite appearances, these two findings are not inconsistent. They simply examine things from two different angles, or, more accurately, different degrees of generalization. Each finding acknowledges that the matter of the legislation is reflected in a regulation governing the conduct of securities market participants (or actors) and imposing a duty of honesty and transparency on everyone in order to promote investor protection and the maintenance of fair, effective and competitive markets through prevention and management of systemic risk. Robert C.J. considers the foregoing characteristics to be the pith and substance of the proposed Act and finds that they are [TRANSLATION] the classic attributes of a scheme regulating the conduct of participants in the securities market.‖ In Dalphond J.A.‘s opinion, the proposed legislation is, in pith and substance, [TRANSLATION] ―the regulation of all the participants of what is to become a single, integrated Canada-wide market‖ and it goes about achieving this in order to [TRANSLATION] ―ensure the stability of capital markets.‖  With respect, we must state from the outset that Dalphond J.A.‘s characterization of the legislation strikes us as overly general and expresses an economic (or even macroeconomic) vision and goal rather than the true pith and substance of the proposed Act, thus disregarding the implementation measures. The remarks of Beetz J., No.: 200-09-006746-090 PAGE: 6 writing for the majority of the Supreme Court with regard to the national dimensions doctrine in Re: Anti-Inflation Act,10 remain highly relevant today: I have no reason to doubt that the Anti-Inflation Act is part of a more general program aimed at inflation and which may include fiscal and monetary measures and government expenditure policies. I am prepared to accept that inflation was the occasion or the reason for its enactment. But I do not agree that inflation is the subject matter of the Act. In order to characterize an enactment, one must look at its operation, at its effects and at the scale of its effects rather than at its ultimate purpose where the purpose is practically all embracing.11  This overinclusive characterization cannot be redeemed by drawing a distinction between trading/dealing in securities (commerce des valeurs mobilières), which would purportedly be the matter to which provincial securities legislation is connected, and the securities or capital market (marché des valeurs mobilières ou des capitaux), which would purportedly be the matter to which the proposed Act is connected. In paragraphs 406, 407 and 410 of his reasons, Dalphond J.A. explains that the former focuses on the purchase and sale of securities and that the latter pertains to a broader economic reality, which includes, by way of example, phenomena like the issue and offering of securities, the rating of securities, the trading of securities on exchanges, the auditing of issuers‘ financial statements, the regulation of intermediaries, as well as investigations, rules for the operation of clearing houses, etc.  We are not convinced that such a distinction is appropriate or correct. On the one hand, in our opinion, characterizing securities trading merely as the juridical act of purchasing and selling is not only very reductionist, it is also decontextualizing. On the other hand, market is precisely what trading/dealing in securities consists in: the full range of transactions in which property is offered and circulated between sellers (including issuers) and potential purchasers. Lastly, however appropriate it may be to distinguish between securities trading or dealing and securities or capital markets, the extrinsic evidence shows that the competent authorities in Britain, the United States, France and other jurisdictions are not content with the distinction, and that they regulate far more than merely purchasing and selling. In any event, trading/dealing and markets are inextricably linked: the most common way to establish a framework for the securities market is to regulate securities trading in a broad sense.  Even if a distinction between the regulating of trading/dealing in securities, and securities market regulation, should be recognized, the legislative (or in this instance proto-legislative) reality would still have to be ascertained.  What is that reality in the present case? As LeBel and Deschamps JJ. wrote in Reference re Assisted Human Reproduction Act, it must be identified ―as precisely as 10  2 S.C.R. 373. 11 Ibid. at 452. A similar warning is made in Reference Re Assisted Human Reproduction Act, supra note 6 at para. 190, per LeBel and Deschamps JJ. No.: 200-09-006746-090 PAGE: 7 possible.‖12 A general and therefore very likely pleonastic and self-referential characterization would not be adequate. For example, asserting that the [ TRANSLATION] ―pith and substance of [the proposed Act] is to institute a complete regulatory regime for Canadian capital markets‖13 as the Attorney General of Canada has done, or that it [TRANSLATION] ―deals with a question of national economic importance: the need to ensure the integrity and competitiveness of Canadian capital markets and for a complete and coordinated enforcement scheme‖, as the Canadian Bankers Association has done,14 is not sufficient.  We do not disagree with Robert C.J. when he writes that, concretely, the Minister of Finance‘s proposed Act is mainly geared toward regulating the conduct of securities market participants (issuers, intermediaries, advisors, rating agencies, exchanges, self- governing entities, etc.) and that this is the hallmark of securities regulation throughout the world, as shown by the extrinsic evidence adduced by the parties. We believe, however, that it would be helpful to add to this perspective, which will require us to examine the proposed Act as well.  Following a preamble and some definitional and interpretive provisions, section 9 of the proposed Act sets out the legislation‘s ostensible purpose: 9. The purposes of this Act are 9. La présente loi a pour objet de : (a) to provide protection to investors a) protéger les investisseurs contre les from unfair, improper or fraudulent pratiques déloyales, irrégulières ou practices; frauduleuses; (b) to foster fair, efficient and b) favoriser des marchés des capitaux competitive capital markets in which the justes, efficaces et compétitifs en public has confidence; and lesquels le public a confiance; (c) to contribute, as part of the c) contribuer, dans le cadre du régime Canadian financial regulatory réglementaire des finances du Canada, framework, to the integrity and stability à l'intégrité et à la stabilité du système of the financial system. financier.  Section 10 states that the Act is binding on Her Majesty in right of Canada.  Part 1 (ss. 11 to 13) establishes a Council of Ministers whose mandate is to facilitate consultations and the exchange of information with respect to the administration of the Act and securities regulation policy in general, to review the annual 12 Supra note 6 at par. 190. This is the analytical approach used by Justice Dickson in Multiple Access Ltd. v. McCutcheon,  2 S.C.R. 161 at 172-173, a case involving the examination of specific statutory provisions, not an entire statute. 13 Factum of the Attorney General of Canada (in French) at para. 76. 14 Factum of the Canadian Bankers Association (in French) at para.52. No.: 200-09-006746-090 PAGE: 8 report of the Canadian Securities Regulatory Authority created by Part 2 of the Act, and to make recommendations to the Minister on appointments.  Part 2 (ss. 14 to 63) implements the administrative structures responsible for enforcing the Act. It has thus created a Canadian Securities Regulatory Authority, managed by a board of directors whose members are appointed by the Governor General in Council on the recommendation of the Minister of Finance. The Authority has a Regulatory Division, headed by a Chief Regulator appointed by the board, and assisted by regional Deputy Chief Regulators who are also appointed by the board. It also has a second division called the Canadian Securities Tribunal, presided and managed by a Chief Adjudicator, who is assisted by an Associate Chief Adjudicator. The Tribunal is not subject to the control of the Authority‘s board of directors, at least with respect to its judicial functions. Its decisions can be appealed to provincial Courts of Appeal. Lastly, the Act establishes a Regulatory Policy Forum and an Investor Advisory Panel.  Under the heading ―Recognized Entities‖, Part 3 (ss. 64 to 72) permits the recognition of self-regulatory organizations, as well as exchanges, clearing agencies and auditor oversight organizations. The first two entities are delegated the power to regulate the operations, standards of practice and business conduct of its members or participants and their representatives (this includes disciplinary matters). The auditor oversight organizations have a similar mission in relation to their participants, with regard to the audit or review of the financial statements that must be filed under the Act. All of these recognized entities report to the Chief Regulator, who may in turn make certain decisions concerning them.  Under the hearing ―Designated Entities‖, Part 4 (ss. 73 to 75) permits the recognition of credit rating organizations, investor compensation funds, dispute resolution services, information processors, trade repositories, and ―any other entity that provides investors or market participants with prescribed services‖ (s. 73(1)(f)). Upon request, these designated entities must provide the Chief Regulator with any information or record in their possession that relates to the administration of the Act. Section 75 expressly provides that the Chief Regulator cannot regulate the substance of credit ratings or the procedures and methodologies by which a credit rating organization determines credit rating.  Part 5 (sections 76 to 79) establishes a registration system for all persons acting as dealers, advisers or investment fund managers. The Chief Regulator has the power to suspend the registration of a person who has not complied with the Act, is not suitable for registration, or is subject to an objection. He also has certain powers to temporarily suspend registration or temporarily subject it to certain conditions.  Until now, it can be seen that the proposed Act merely sets up the chessboard, as it were. The substantive regulatory provisions of the proposed regulatory scheme No.: 200-09-006746-090 PAGE: 9 begin in Part 6. It is these provisions that are most helpful in determining the pith and substance of the proposed Act.  Part 6 (sections 80 to 88) makes the distribution of securities contingent on fulfilling the prior obligation to file a prospectus with the Chief Regulator, unless an exemption applies. It also sets out the requirements for these prospectuses. Section 82 is at the heart of Part 6 in that it articulates the principle underlying the measures that are contained therein. The provision states: 82. A prospectus must provide full, true 82. Le prospectus donne complètement, and plain disclosure of all material fidèlement et clairement tous les faits facts relating to the securities issues or importants se rapportant aux valeurs proposed to be distributed and must mobilières émises ou dont le placement est comply with the prescribed envisagé et satisfait aux exigences requirements. réglementaires.  Part 7 (ss. 89 to 92) concerns derivatives. Section 89 prohibits trading in exchange-traded derivatives unless the exchange is accepted by the Chief Regulator. Section 90 prohibits any person from trading in designated derivatives ―…unless a prescribed disclosure document in respect of the derivative has been filed … and accepted by the Chief Regulator and has been delivered in accordance with the regulations.‖ Section 91 exempts exchange-traded derivatives or designated derivatives from the requirements of Part 6 (prospectus). Section 92 concerns a particular case of derivatives.  Part 8 (ss. 93 to 100), entitled ―Disclosure and Proxies‖, requires issuers to disclose all information about their business and affairs, including financial statements, and any other disclosure required by the regulations. Issuers must also update this information immediately in the event of a material change. Insiders with a reporting issuer other than a mutual fund are required to disclose all information relative to the securities that they own or control. When requested by the Chief Regulator, an issuer‘s director, officer, promoter or control person shall provide the required information (s. 98). Finally, the proposed Act provides that an issuer that calls a meeting of holders of its securities must provide them with notice and send them a form of proxy in the prescribed form. The solicitation of proxies is subject to the obligation to send out an information circular.  Part 9 (ss. 101 to 108) covers take-over bids and issuer bids that are subject to various formalities intended to guarantee adequate distribution of all information needed by the holders of the targeted securities and also an orderly execution of the transactions carried out under these bids. Some of the terms and conditions of the mechanics of an offer are also governed by these provisions (e.g. deposits, delivery, availability of funds, etc.).  Part 10 (ss. 109 to 130), entitled ―Market Conduct‖, sets out various requirements relating to the behaviour of market participants, registrants, fund managers, offerors, No.: 200-09-006746-090 PAGE: 10 offerees and issuers. Certain practices are expressly prohibited (promising to repurchase a security or to refund the purchase price, providing a guarantee as to the future value of a security, putting unreasonable pressure on another person to purchase, hold or sell a security, carrying out a transaction with a person who does not have the legal capacity using the name of another registrant, concealing information, etc.). Conflicts of interest must be revealed and managed. Insider transactions are prohibited in the following terms: 117. (1) A person must not purchase or 117. (1) Il est interdit à toute personne trade a security of a reporting issuer or of d'effectuer une opération sur l'une des an issuer whose securities are publicly valeurs mobilières d'un émetteur traded, or enter into a transaction assujetti ou d'un émetteur dont les involving a related financial instrument, if valeurs mobilières sont négociées sur the person is in a special relationship with un marché, d'en acheter une ou the issuer and knows of a material d'effectuer une transaction concernant change with respect to the issuer, or a un instrument financier connexe, si material act with respect to securities of elle a des rapports particuliers avec the issuer, that has not been generally l'émetteur et connaît un changement disclosed. important le concernant ou un fait important concernant ses valeurs mobilières, qui n'a pas été rendu public. (2) An issuer described in subsection (1) (2) Il est interdit à l'émetteur visé au or a person in a special relationship with paragraphe (1), de même qu'à toute such an issuer must not inform another personne ayant des rapports person of a material change with respect particuliers avec lui, d'informer une to the issuer or a material fact with autre personne d'un changement respect to securities of the issuer, unless important le concernant ou d'un fait that change or fact has been generally important concernant ses valeurs disclosed or unless informing that other mobilières, sauf s'il a déjà été rendu person is in the necessary course of public ou si cela est nécessaire dans le business of the issuer or person in the cours de ses affaires ou de celles de la special relationship. personne ayant des rapports particuliers avec lui. (3) A person that proposes to do one or (3) La personne qui a l'intention de more of the actions set out in paragraphs prendre l'une ou l'autre des mesures ci- (a) to (c) must not inform another person après ne peut informer une autre of a material change with respect to an personne d'un changement important issuer described in subsection (1) or a concernant l'émetteur visé au material fact with respect to securities of paragraphe (1) ou d'un fait important that issuer, unless that change or fact concernant ses valeurs mobilières que has been generally disclosed or unless s'il a déjà été rendu public ou si cela est No.: 200-09-006746-090 PAGE: 11 informing that other person is necessary nécessaire pour la prise de la mesure: to effect the proposed action: a) présenter une offre publique d'achat (a) make a take-over bid for securities of à l'égard de valeurs mobilières de the issuer; l'émetteur; (b) become a party to a reorganization, b) participer à une réorganisation, une amalgamation, merger, arrangement or fusion, un arrangement ou un similar business combination with the regroupement similaire d'entreprises issuer; or avec l'émetteur; (c) acquire a substantial portion of the c) acquérir une portion importante issuer's property. des biens de l'émetteur. (4) If a material change with respect to an (4) À moins que le changement issuer described in subsection (1) or a important concernant l'émetteur visé material fact with respect to securities of au paragraphe (1) ou le fait important that issuer has not been generally concernant ses valeurs mobilières n'ait disclosed, the issuer, or a person that has été rendu public, il est interdit à cet knowledge of the change or fact and that émetteur - de même qu'à toute either is in a special relationship with the personne qui a connaissance du issuer or proposes to do one or more of changement ou du fait et qui a des the actions set out in paragraphs (3)(a) to rapports particuliers avec lui ou a (e), must not recommend or encourage l'intention d'effectuer l'une ou plusieurs another person to purchase or trade a des mesures mentionnées aux alinéas security of the issuer or to enter into a (3)a) à e) - de recommander à une transaction involving a related financial autre personne d'effectuer une instrument. opération sur l'une des valeurs mobilières de l'émetteur, d'en acheter une ou d'effectuer une transaction concernant un instrument financier connexe, ou de l'y inciter.  These standards and requirements are all based on the obligations of honesty, integrity, good faith and diligence, as well as an ongoing duty of information and transparency that is expressed in various ways (obligation to keep records, obligation for accuracy in disclosing facts, etc.).  Part 11 (ss. 131 to 168) contains administration and enforcement provisions (reviews and inquiries, and all types of orders, including orders for the production of information, which are covered in a separate division.)15 This part also sets out provisions regarding general offences (ss. 153 to 156) and criminal offences (ss. 158 to 167), many of which cover offences that are currently in the Criminal Code.  Parts 12 (general provisions – ss. 169 to 193) and 13 (which covers secondary market disclosure – ss. 194 to 219) involve civil sanctions of the proposed Act by 15 Division 4, sections 148–152. No.: 200-09-006746-090 PAGE: 12 establishing a complete regime of civil liability (from misconduct to the calculation of damages, through the rules of court actions, including the defences).  Finally, Part 14 of the proposed Act (ss. 220 to 249) includes provisions on records and information (including those that are made available to the public) and other topics. It gives the Authority important regulatory powers (including the power to impose restrictions on the ownership and control of stock exchanges) and attributes certain specific powers to the Chief Regulator (including cease-trade orders in cases of non- compliant trading activities).  Part 15 (ss. 250 to 254) sets out a transitional regime to which we will return later, that provides for the progressive implementation of the proposed Act throughout Canada.  Part 16 provides for consequential amendments to various acts.  The examination of the proposed Act in its entirety and of each of its provisions demonstrates that the planned regulatory scheme centres around two major axes – (1) the enforcement imposition upon market players of behavioural standards (participants – issuers, intermediaries, fund managers, offerors, offerees, officers, and insiders), including the monitoring of certain transactions, such as in the case of take-over bids or issuer bids; and (2) information and the disclosure of information. The former is the expression of an ethical normativity, which is implemented by means of a series of control mechanisms. The latter involves ensuring the integrity and transparency of the information, again by means of various supervisory mechanisms.  We shall not dwell on the first axis, which is discussed at length in the reasons of Robert C.J. and those of Dalphond J.A. A few words on the subject of information, however, are in order.  If there is a recurrent and dominant theme in this proposed Act, it is that of information and its disclosure. Whether it involves the matter of prospectuses, derivatives, or take-over and issuer bids, the theme of information occupies centre stage. The interest in credit-rating agencies is relative to information. Part 8 (Disclosure and Proxies) is almost exclusively devoted to it. Part 13 establishes a full regime of civil liability in connection with the information requirements relating to the secondary market. Throughout, the Act affirms and governs the duty of information and the disclosure of information; it requires that the information be produced, accurate, up-to- date and flowing. Even offences by insiders (insiders who themselves are required to disclose information as to their situation) are ―offences of information‖, committed by those who are attempting to secure benefits for themselves by taking advantage of privileged information that is known only to them alone or to a small number of individuals. A large portion of the enforcement mechanisms is focused on this duty of information and all its facets. No.: 200-09-006746-090 PAGE: 13  This is a fundamental and crucial dimension of the proposed Act. As the Supreme Court, per Binnie J., writes in Kerr v. Danier Leather Inc.,16 ―disclosure lies at the heart of an effective securities regime,‖ although ―the extent of the disclosure is a matter of legislative policy.‖ Economic analysis teaches us that information is key to markets and that only accurate, reliable, public, freely available information is a guarantee of fair and efficient markets in general and fair and efficient transactions and operations in particular, because it enables stakeholders to act knowingly and to make informed choices.  That said, the proposed Act, at least in its defining aspects, does not really regulate the securities market or even the overall trade in securities, at least not directly (and barring exceptions), to use the dichotomy suggested by Dalphond J. 17 Rather, it regulates the transactional environment by ensuring that all the stakeholders meet strict standards of conduct and are subject to an equally strict duty to provide information, whether engaging in major stock transactions or individual purchases. In other words, the proposed Act regulates the conditions that must be in place so that securities transactions can be conducted. This is not to say that it has no impact on the market or trade, but the proposed Act does not directly regulate either the market or trade per se. Rather, it focuses on the market and trade in relation to its purposes and intended impact, and the measures set out in the proposed Act are naturally designed not to impede, but to foster optimal market and trade conditions.  In summary, regulating stakeholders‘ conduct and regulating information are the two main pillars of the proposed Act, whose intent and intended impact – it is almost trite to say, because this is so much a part of regular securities legislation 18 – is to protect investors against unfair, improper or fraudulent practices and to maintain a fair, efficient, competitive securities market in which integrity, stability and transparency are preserved. This, in other words, is the purpose of the law as defined in section 9 of the proposed Act (supra, para. ). All the rest, whether it be the administrative structures put in place to enforce the law or the system of criminal and civil penalties, is organized around that. It is thus this particular combination of purposes, effects (anticipated in this case, because the law has not yet been passed), means and mechanisms that constitutes the pith and substance of the proposed Act and gives it its pith and substance.  The preamble to the proposed Act is certainly more ambitious and appears to allow for regulating capital markets themselves, stating that it is important for Canada to have a strengthened, comprehensive and coordinated enforcement regime for those markets, in order to protect the integrity and stability of Canada‘s financial system. But beyond the rhetoric (which is fairly commonplace in legislative preambles, this particular 16  3 S.C.R. 331 at para. 5. 17 In contrast, agriculture offers an example of true market regulation that goes beyond regulating stakeholders to include quotas to control production, product inspection and classification, quality control, control over distribution and trade flow, price control, and so on. 18 As shown by the evidence and the review of various relevant statutes. No.: 200-09-006746-090 PAGE: 14 subgenre of legal literature), the means set out in the proposed Act are more modest, as we have just seen and as is reflected in subsection 16(2), which summarizes them in a few words: 16. … 16. … (2) The primary means for achieving the (2) Les principaux moyens de réaliser purposes of this Act include l‘objet de la présente loi sont notamment : (a) requirements for timely, accurate and a) des exigences concernant la efficient disclosure of information; communication de l‘information en temps opportun et avec exactitude et efficience; (b) prohibitions of unfair, improper or b) des interdictions visant les pratiques fraudulent market practices; déloyales, irrégulières ou frauduleuses du marché; (c) standards for honest and responsible c) des normes touchant le conduct by market participants; comportement honnête et responsable des participants du marché; (d) the monitoring and evaluation of d) la surveillance et l‘évaluation des issues or developments affecting the questions et faits nouveaux touchant integrity or stability of capital markets; l‘intégrité ou la stabilité des marchés des and capitaux; (e) cooperation and coordination among e) la coopération et la coordination entre financial authorities, in Canada and les autorités financières, au Canada et à elsewhere. l‘étranger.  Paragraph (d) above uses the expression ―capital markets,‖ but the monitoring and evaluation of issues affecting the integrity of these markets are certainly not the dominant characteristic of the proposed Act, which does not go into much detail in this regard.  In short, this examination of the essence of what the proposed Act does and how it does it reveals that it is about regulating the conduct of participants and stakeholders in order to protect investors against unfair, improper or fraudulent practices (which is the dominant purpose, considering that the proposed Act goes into minute detail about regulating civil remedies) and to maintain a fair, efficient, competitive securities market in which integrity, stability and transparency are preserved. The proposed Act is not about all the aspects of the securities market, but focuses on regulating the supply of goods and services (brokerage, operating an exchange, initial public offering, etc.). No.: 200-09-006746-090 PAGE: 15  Finally, a few observations to clarify and conclude our analysis of the pith and substance of the proposed Act.  First, there is the question of systemic risk.  In Reference re Securities Act (Canada)19, Slatter J.A. writes:  The Government of Canada suggests that the proposed federal securities legislation will also address ―systemic risk‖. By ―systemic risk‖ is meant widespread undesirable investment practices that might lead to wholesale disruptions of the capital markets. However, not being a ―merit system‖, the legislation does not address the types of irresponsible investment practices that might create such risks, nor does it limit the types of investments that can be sold. The focus of the proposed federal securities legislation (like the provincial legislation) is the integrity of market participants, protection of public investors, and ensuring ethical practices in the capital markets.  We could agree with Slatter J.A. that the proposed Act does not address the only means that would enable it to effectively prevent and manage systemic risk. With all due respect, however, we are of the opinion that, while this is not the element that defines its pith and substance, the proposed Act nevertheless intends to address the issue of systemic risk.  Prevention and management of systemic risk is one of the main themes of the argument put forward by the Attorney General of Canada and the Canadian Bankers Association. The proposed Act itself does not use the term ―systemic risk,‖ 20 but that is what it is referring to when it talks about the stability and integrity of the financial system or capital markets or financial markets (there is some variation in the terminology). The sixth point in the preamble and paragraphs 9(c) and 16(2) (d) make protecting and fostering the stability and integrity of the system and the market a guiding principle. It therefore appears that preventing and managing systemic risk – or rather, protecting and fostering the stability and integrity of the system or the market – are part of the purpose of the proposed Act.  We must not stop there, however. We must look at how this principle is applied. The proposed Act fosters stability and integrity primarily by regulating the conduct of market participants and requiring them to be transparent and to provide information at all times, as well as by providing for general oversight by the regulatory authority. In other words, the proposed Act would control (or try to control) systemic risk by controlling participants whose conduct could be risky and by controlling information. The prevention and reduction of systemic risk are the consequences and intended effects of controlling participants and information. 19 2011 ABCA 77. 20 In stark contrast to the Payment Clearing and Settlement Act, S.C. 1996, c. 6, which refers specifically to systemic risk and defines the concept (s. 2). Moreover, we wonder whether systemic risk, regardless of where in the financial system it originates, can be regulated by means of this legislation. No.: 200-09-006746-090 PAGE: 16  The proposed Act also contains the following provisions, which support this analysis: 109. … 109. [...] (3) On request by the Chief Regulator, (3) Sur demande du régulateur en chef, a market participant must provide the le participant du marché lui fournit Chief Regulator with the information l‘information pouvant être exigée en vue that may be required for the purpose of de la contribution à l‘intégrité et à la contributing to the integrity and stability stabilité des marchés financiers ou de of financial markets or conducting l‘analyse en matière d‘orientations policy analysis related to the concernant l‘exécution de la présente administration of this Act or to loi ou la réglementation des valeurs securities regulation in general. mobilières en général. 163. (1) Without limiting the generality 163. (1) Sans que soit limitée la portée of section 718.2 of the Criminal Code, générale de l‘article 718.2 du Code a court that is imposing a sentence for criminel, lorsque le tribunal détermine la an offence referred to in any of peine à infliger à l‘égard d‘une infraction sections 158 to 162 must consider the prévue à l‘un des articles 158 à 162, les following as aggravating faits ci-après constituent des circumstances: circonstances aggravantes : … [...] (b) the offence adversely affected, or b) l‘infraction a nui — ou pouvait nuire — had the potential to adversely affect, à l‘intégrité ou à la stabilité de l‘économie the integrity or stability of the Canadian canadienne, du système financier economy or financial system or any canadien ou des marchés financiers au financial market in Canada or investor Canada ou à la confiance des confidence in such a financial market; investisseurs dans un marché financier au Canada; … [...] 224. (1) The Chief Regulator may, if he 224. (1) S‘il estime que cela ne serait pas or she considers that it would not be préjudiciable à l‘intérêt public, le prejudicial to the public interest to do régulateur en chef peut communiquer à so, disclose any information obtained une autre agence réglementant les under this Act, to another securities or valeurs mobilières ou le secteur financier, financial regulatory authority, an à une bourse, à un organisme exchange, a self-regulatory d‘autoréglementation ou à une autorité organization or another governmental administrative, situés au Canada ou à or regulatory authority, in Canada or l‘étranger, tout renseignement obtenu elsewhere, if the disclosure is for the sous le régime de la présente loi s‘il le purpose of the administration of this fait pour l‘exécution de celle-ci — Act, including contributing to the notamment pour contribuer à l‘intégrité et integrity and stability of the financial à la stabilité du système financier —, ou system, or of assisting in the pour appuyer l‘exécution de la législation No.: 200-09-006746-090 PAGE: 17 administration of securities or financial en matière financière ou de valeurs legislation in Canada or elsewhere. mobilières, au Canada ou à l‘étranger. … [...] 228. (1) The Authority must publish a 228. (1) L‘Autorité publie un avis de tout notice of every regulation that it règlement qu‘elle se propose de prendre. proposes to make. [...] … (4) Despite subsection (1), a notice is (4) Malgré le paragraphe (1), la not required to be published in the publication d‘un avis n‘est pas exigée following circumstances: dans les cas suivants : (c) the Authority considers that there is c) d‘une part, l‘Autorité est d‘avis que le an urgent need for the proposed projet de règlement répond à un besoin regulation and that, without it, there is a urgent et que, sans celui-ci, les substantial risk of material harm to investisseurs ou l‘intégrité ou la stabilité investors or to the integrity or stability des marchés des capitaux risqueraient of capital markets, and the Authority fortement de subir un préjudice important has the Minister‘s consent to make the et, d‘autre part, elle a obtenu l‘agrément regulation and to not publish a notice. du ministre quant à la prise du règlement et à la non publication de l‘avis. … [...] 232. (1) The Governor in Council may 232. (1) Le gouverneur en conseil peut, make an order requiring the Authority par décret, ordonner à l‘Autorité la prise, to make, amend or repeal a regulation la modification ou l‘abrogation, dès que under section 227, as provided in the possible et de la façon précisée au order, as soon as practicable, if the décret, d‘un règlement au titre de l‘article Governor in Council is of the opinion 227 s‘il est d‘avis que la mesure répond à that there is an urgent need for such a un besoin urgent et que sans elle les measure and that, without it, there is a investisseurs ou l‘intégrité ou la stabilité substantial risk of material harm to des marchés des capitaux risqueraient investors or to the integrity or stability fortement de subir un préjudice of capital markets. important. … [...] [Emphasis added.] [Soulignements ajoutés.]  The two important measures in this regard are those set out in subsections 228(4) and 232(1), which give the regulatory authority or the Governor in Council emergency power in the event that there is imminent risk of harm to the stability or integrity of capital markets. In order to emphasize the importance of these measures, there was a great deal of talk at the hearing, as well as in some of the documents submitted as evidence, about global recession and the risk of a collapse of the global No.: 200-09-006746-090 PAGE: 18 financial market, which is something we have seen a striking example of in recent years. It is far from certain, however, that this crisis, which was largely caused by financial products that had no real value or were outrageously speculative and by a real estate bubble, could have been prevented by a law that does not address the quality of the investments brought on the market, as Slatter J.A.21 points out (this observation is not a criticism, as regulation proceeds everywhere more or less according to the same basic model, which is more or less stringent, depending on the jurisdiction).  Nevertheless, regardless of whether the means chosen are theoretical or not, effective or not, possible or not, the question of market stability and integrity, and therefore systemic risk, is an integral part of the pith and substance of the proposed Act and its true character. As we can see, however, and this is crucial to the characterization process, it is not the dominant characteristic of the legislation (regardless of what the preamble states).  Moreover, two additional issues need to be addressed: the first concerns the interprovincial and even international scope of the securities market; the second has to do with what we will call the dematerialization of operations and securities.  If there is one thing that is clear from the evidence, it is that the securities market is national and international in scope, as the Supreme Court has had occasion to note: Multiple Access Ltd. v. McCutcheon22 at 173 in fine and 174; Global Securities Corp. v. British Columbia (Securities Commission)23 at para. 28.  If the securities market or trade in Canada was ever purely local (after all, in the 19th century,24 shares in certain major Canadian companies were already being traded on the London and New York stock exchanges), it has not been so for a long time. 25 Today, shares issued by a company can be traded nationally or internationally; investors who buy on the Canadian market (or the market in each province) may come from countries around the world and, conversely, Canadians can buy securities outside Canada; many brokerage firms are able to operate in more than one jurisdiction and can serve a national and international clientele; the same rating agencies are found 21 Reference re Securities Act (Canada), supra note 19. 22 Supra note 12. 23  1 S.C.R. 494. 24 A time when accessing public money through securities was not necessarily Canadian companies‘ preferred method of raising capital. 25 In the evidence, the only report that offers some information about the history of the Canadian securities market, its international aspects and its regulation is the report by Stéphane Rousseau entitled L’encadrement du secteur des valeurs mobilières par le Québec et le débat sur une commission nationale des valeurs mobilières, June 22, 2010, 251 pp. at 26 et seq., evidence of the Attorney General of Quebec, Vol. IV at 984 et seq. For a brief but accurate description of the international nature of the securities market since the 18th century, in Europe and elsewhere, see The Palgrave Dictionary of Transnational History, Akira Iriye & Pierre-Yves Saunier, eds. (Basingstoke, England/New York: Palgrave Macmillan, 2009) at 408 et seq. (―Financial markets,‖ the term used for both the primary and secondary securities market). No.: 200-09-006746-090 PAGE: 19 everywhere; and stock exchanges are places where stocks are traded locally, nationally and internationally. The integration of economies on a North American and global scale has clearly affected the securities market, which is one component of a huge global network, just as it has affected all other markets. This globalization is facilitated and no doubt intensified by the technology we have now, especially computer and Internet technology.  Nevertheless, the fact that both market and trade (to use that distinction) are interprovincial and international in scope does not change the pith and substance of the proposed Act. It would have done so had the pith and substance of the proposed Act been the regulation of the interprovincial and international aspects of the securities market or trade, because that would have been relevant for the purposes of the first branch of the power conferred on the federal government by subs. 91(2) of the Constitution Act, 1867, but that is not what the proposed Act does or intends to do. The Attorney General of Canada acknowledges this. What the proposed Act would regulate, primarily, is the so-called ―national‖ transactional environment, which, because of Canadian geopolitics, is inevitably intraprovincial.  This aspect of things is relevant only when it comes to determining which power the proposed Act comes under, which is the second step in the constitutional analysis, and that is when we will discuss it again.  In the same way, we believe that the phenomenon of the dematerialization of securities and exchanges themselves, again through technology, does not affect the pith and substance of the proposed Act. Dematerialization is not something new to the legal world. An asset is not less of an asset because it is not tangible. For a long time now, it is no longer required that parties meet together in the same location in order to sign a contract. The advent of new information technologies simply gives parties new ways of doing business from a distance. Payments can be made without exchanging any banknotes. You can hold a deed without literally having it in your hands. Whether investors invest in dematerialized products, that cannot be found in a safe (although they still have a juridical locus), or whether all types of transactions, exchanges and operations, regardless of their nature, are done from a distance through computer networks and structures, which also have the advantage of being instantaneous, is not relevant to determining the pith and substance of the proposed Act.26  In short, and to conclude on this point, let us repeat that the pith and substance of the proposed Act is about regulating the conduct of participants and stakeholders in order to protect investors against unfair, improper or fraudulent practices and to maintain a fair, efficient, competitive securities market whose integrity, stability and 26 See Bennett v. British Columbia (Securities Commission) (1991), 82 D.L.R. (4th) 129 (B.C.S.C.), affirmed (1992), 94 D.L.R. (4th) 339 (B.C.CA), application for leave to appeal to the Supreme Court dismissed on August 27, 1992, 23105,  2 S.C.R. v. No.: 200-09-006746-090 PAGE: 20 transparency are preserved and upheld. That is the pith and substance of the proposed Act (see paragraph , supra).  That being the case, pith and substance of the proposed Act is clearly no different from that of the provincial legislation, particularly the laws of Quebec27 and Alberta, which have essentially, if not exactly, the same objectives and the same effects and use the same means and mechanisms, including those pertaining to interprovincial and international cooperation, a subject covered under paragraph 16(2)(e) of the proposed Act. In fact, they are so similar that the heart of the proposed Act and its regulatory provisions follow the model of the provinces‘ legislation, particularly that of Alberta upon which it is based.28  These similarities are apparent in the laws themselves and are confirmed by the evidence. Here and there, the emphasis may be put on one element rather than another as a result of legislative choice. It is clear that, although provincial legislators may have first entered the field of securities regulation to protect investors, they are now, and have been for a long time, albeit to varying degrees, concerned with maintaining and promoting a fair, efficient and competitive securities market, whose stability, integrity and transparency29 must be assured. The provinces also chose the regulation of participants, stakeholders and information as a preferred means of achieving these objectives; that is the path that the proposed Act, which is clearly based on provincial methods, is taking.  Slatter J.A. of the Court of Appeal of Alberta had the following to say about the similarity between the model used in the proposed Act and the provincial models:  None of the provinces presently operates what is known as a ―merit jurisdiction‖. Provincial security regulators do not pass on the merits of any particular investment; they do not attempt to pick winners or losers. Issuers are allowed to sell high risk investments. The focus of the present provincial (and proposed federal) securities regulation is on ensuring "full, plain and true" initial and continuous disclosure, leaving the investment decision up to the investor; it is the issuers and intermediaries who are the regulated participants, not the 27 For a thorough analysis of the Quebec securities regulatory regime (made up of several laws), please see the following study, which was submitted as evidence by the Attorney General of Quebec: Stéphane Rousseau, op. cit., note 25, evidence of the Attorney General of Quebec, vol. IV, p. 959 ff. 28 Let us note in passing that the news release issued by the Minister of Finance to announce the proposed Act explains that ―[t]he proposed Canadian Securities Act is built on provincial securities regulation and harmonizes existing legislation in the form of a single statute‖, which is true to the point that it actually copies some of that legislation. See News Release 2010-051, May 26, 2010, http://www.fin.gc.ca/n10/10-051-eng.asp (Tab 81 of the Quebec Attorney General‘s book of authorities). 29 In this regard, let us note that it is not because provincial laws do not explicitly address ―systemic risk‖ (any more than the proposed Act does) that they are not concerned about it. It is implicit in the laws in question that prevention and management of systemic risk are part of both the purpose and effects of these laws, which seek to preserve the stability and integrity of the market in order to guarantee the protection of investors. No.: 200-09-006746-090 PAGE: 21 investors. After compliance with the regulatory thresholds, the trading in securities is a free market capitalist system where investors are entitled to make such investments as they see fit. The primary focus of the statutes is on the selling of securities; there are only a few provisions (such as Alberta's s. 93 on market manipulation) that regulate the buying of securities. ...  As the questions on this Reference reveal, the federal government now proposes, for the first time, to enact comprehensive legislation regulating the securities industry at the national level. The proposed federal legislation mirrors, from a functional point of view, the existing provincial securities regulation regimes: see proposed ss. 9 and 16. Occasional different policy choices in the content do not change the nature of the proposed legislation for constitutional purposes. It will license and regulate the conduct of participants in the securities industry. It will regulate the raising of money from the public in much the same way as the provincial legislation does, and will contain similar provisions for continuous disclosure. The federal legislation will also regulate extraordinary transactions, and provide for investigation, enforcement, and civil liability. . . 30  We do not use the exact same words as Slatter J.A., but we concur with his statement, which clearly illustrates, in essence, the pith and substance of the proposed Act and of the provincial laws. 3. Classification of power  Under which constitutional power should the proposed Act fall? As we saw earlier, according to the Attorney General of Quebec, the Attorney General of Alberta and the Barreau du Québec, this type of regulation should fall entirely and exclusively under provincial power pursuant to subsection 92(13) of the Constitution Act, 1867. According to the Attorney General of Canada and the Canadian Bankers Association (the ambiguity of whose arguments will be discussed shortly), the proposed Act should fall under the general branch of the federal trade and commerce power, pursuant to subsection 91(2) of the Constitution Act, 1867. Furthermore, some provisions of the proposed Act clearly pertain to criminal law and fall under subsection 91(27) of the Constitution Act, 1867. In this regard, it is important to note that the Attorney General of Canada is not claiming that the proposed Act in its entirety should be an expression and demonstration of Parliament‘s power to make criminal laws. 31 He is also not invoking the first branch of federal trade and commerce power (that is to say, federal power over international and interprovincial aspects of trade and commerce). a. Preliminary remarks on the double aspect 30 Reference re Securities Act (Canada), supra note 19. 31 Contrary to what he said in Reference re Assisted Human Reproduction Act, supra note 6. No.: 200-09-006746-090 PAGE: 22  According to the Attorney General of Canada, this situation is a classic example of the double aspect doctrine since the regulation of capital markets has a ―trade and commerce‖ aspect and a ―property and civil rights‖ aspect. The Canadian Bankers Association made the same argument in its submission.  If such is the case, then, in theory at least, the proposed Act and the provincial securities laws could eventually coexist. In the event of conflict, the federal law would prevail under the doctrine of paramountcy of federal legislation.  This assertion, however, presents some challenges.  First, despite the fact that they are saying that this case involves the double aspect doctrine, under which it is assumed that federal and provincial legislation can coexist, the Attorney General of Canada and the Canadian Bankers Association have forcefully argued that the securities market needs to have a single, consistent regulatory system. A single system would allow for centralized and flexible management of this essential component of Canada‘s financial system, which is, in fact, one of the system‘s four pillars,32 in a way that would take into account both regional and national interests. Moreover, only a single system would allow Canada to be heard at the international level, to effectively promote Canadian interests internationally and to participate in the development of consistent regulatory policies for capital markets (see the fifth ―Whereas‖ in the Preamble of the proposed Act).  We do not see how this argument fits with the idea that Canada could have, in addition to a single, consistent and complete system, ten provincial systems that deal with the same subject in the same way. Rather than being convincing, the argument militates in favor of Parliament‘s exclusive power over securities, a concept that is difficult to reconcile with the double aspect doctrine. Yet, the Attorney General of Canada and the Canadian Bankers Association seem to be advocating for both these things, which makes their constitutional position ambiguous.  Moreover, the ambiguity of their arguments is even more obvious when we consider the transitional regime set out in the proposed Act, and, particularly, s. 250: 250. (1) Subject to sections 251 and 250. (1) Sous réserve des articles 252, sections 1 to 10 and Parts 1 to 14 251 et 252, les articles 1 à 10 et les do not apply in a province unless it is parties 1 à 14 ne s‘appliquent pas designated under subsection (2). dans une province à moins qu‘elle n‘ait été désignée au titre du paragraphe (2). (2) After receiving the written consent (2) Après réception du 32 The others are the banking system, the insurance market, and the trust company market. No.: 200-09-006746-090 PAGE: 23 of the Lieutenant Governor in Council consentement écrit du lieutenant- of a province and on the gouverneur en conseil de la province recommendation of the Minister, the et sur recommandation du ministre, Governor in Council may, by order, le gouverneur en conseil peut, par designate the province as a décret, désigner la province à titre de participating province. province participante. (3) Before making his or her (3) Le ministre ne peut faire sa recommendation, the Minister must be recommandation que s‘il est satisfied that the single securities convaincu que le régime unique de regulatory regime that is established by réglementation des valeurs this Act, and that is applicable mobilières qui est établi par la throughout all of the participating présente loi et applicable dans provinces, will apply in the province to l‘ensemble des provinces be designated. participantes s‘appliquera dans la province en cause. 251. The following provisions apply to 251. Les dispositions ci-après the whole of Canada: s‘appliquent dans l‘ensemble du Canada : (a) the definitions “issuer”, “material a) les définitions de « changement change”, “material fact”, important », « émetteur », « fait “misrepresentation”, “related important », « instrument financier financial instrument”, “security”, connexe », « offre publique “take-over bid” and “trade” d’achat », « operation », « présentation inexacte des faits » et « valeur mobilière » (b) in section 2; b) à l‘article 2; (c) section 8; c) l‘article 8; and sections 158 to 167. les articles 158 à 167. 252. (1) Sections 148 to 152 apply in 252. (1) Les articles 148 à 152 a province that is not designated under s‘appliquent, sous réserve des subsection 250(2), subject to the dispositions ci-après, dans la following: province qui n‘a pas été désignée comme province participante au titre du paragraphe 250(2) : (a) a reference to ―recognized entity‖ is a) la mention de « une entité to be read as a reference to ―self- reconnue » et celle de « l‘entité regulatory organization, exchange, reconnue » valent respectivement clearing agency or auditor oversight mention de « un organisme organization‖; d‘autoréglementation, une bourse, une agence de compensation ou un No.: 200-09-006746-090 PAGE: 24 organisme de surveillance des vérificateurs » et de « l‘organisme d‘autoréglementation, la bourse, l‘agence de compensation ou l‘organisme de surveillance des vérificateurs »; (b) references to ―registrant‖ and ―registrants‖ are to be read as b) les mentions de « à un inscrit », de references to ―dealer, underwriter, « l‘inscrit », de « tout inscrit » et de adviser or investment fund manager‖ « des inscrits » valent respectivement and ―dealers, underwriters, advisers mention de « à un courtier, un and investment fund managers‖, souscripteur à forfait, un conseiller ou respectively; and un gestionnaire de fonds d‘investissement », de « le courtier, le souscripteur à forfait, le conseiller ou le gestionnaire de fonds d‘investissement », de « tout courtier, souscripteur à forfait, conseiller ou gestionnaire de fonds d‘investissement » et de « des courtiers, souscripteurs à forfait, conseillers et gestionnaires de fonds d‘investissement »; (c) a reference, in paragraph 149(2)(a) or 150(2)(a), to ―an offence under this c) la mention de « infraction à la Act‖ is to be read as a reference to ―an présente loi » vaut, aux alinéas offence under sections 158 to 162‖. 149(2)a) et 150(2)a), mention de « infraction à l‘un des articles 158 à (2) Section 168 applies in a province 162 ». that is not designated under subsection 250(2), subject to the following: (2) L‘article 168 s‘applique, sous réserve des dispositions ci-après, dans la province qui n‘a pas été désignée au titre du paragraphe 250(2) : (a) the reference to ―to the Chief Regulator, to a person acting under the a) la mention de « au régulateur en Chief Regulator‘s authority or to a chef, à une personne agissant sous peace officer‖ is to be read as a son autorité ou à un agent de la reference to ―to a peace officer‖; paix » vaut mention de « à un agent de la paix »; (b) the reference to ―a peace officer who is investigating an offence under b) la mention de « infraction à la this Act, a designated person who is présente loi ou d‘une personne conducting a review under section 133 désignée ou autorisée par le or an authorized person who is régulateur en chef pour mener un inquiring into a matter under section examen ou une enquête aux termes 134‖ is to be read as a reference to ―a des articles 133 ou 134, selon le peace officer who is investigating an cas » vaut mention de « infraction à No.: 200-09-006746-090 PAGE: 25 offence under sections 158 to 162‖; l‘un des articles 158 à 162 »; and (c) a reference to ―an offence or a contravention under this Act‖ is to be c) la mention de « liés à une read as a reference to ―an offence infraction ou à une contravention à la under sections 158 to 162‖. présente loi » vaut mention de « liés à une infraction à l‘un des articles 158 à 162 ». 253. (1) The definition ―release‖ in section 194 includes filing a document 253. (1) Le terme « publication », à with the securities regulatory authority l‘article 194, vise notamment le dépôt of a province that is not designated d‘un document auprès d‘une agence under subsection 250(2). de réglementation des valeurs mobilières d‘une province qui n‘a pas été désignée au titre du paragraphe 250(2). (2) The aggregate of all damages assessed after appeals that is referred (2) Le total des dommages-intérêts to in the description of B in paragraph — évalués après les appels — qui 212(1)(b) must include all damages est visé à l‘élément B de l‘alinéa assessed after appeals, if any, against 212(1)b) comprend les dommages the person in all actions brought under évalués — après les appels legislation, comparable to any of éventuels — auxquels le défendeur a sections 196 to 199, of provinces that été condamné dans les actions are not designated under subsection intentées en vertu de toute 250(2). disposition — comparable à l‘un des articles 196 à 199— de la législation de toute province qui n‘a pas été désignée comme province participante au titre du paragraphe 250(2). (3) In determining whether to approve the settlement of an action referred to (3) Pour décider s‘il approuve ou in subsection 215(1) and in addition to non le règlement de l‘action visée the considerations set out in au paragraphe 215(1), le tribunal subsection 215(2), the court must tient compte, en plus des facteurs consider whether there are any actions visés au paragraphe 215(2), des outstanding brought under legislation, actions pendantes intentées en comparable to any of sections 196 to vertu de toute disposition — 199, of provinces that are not comparable à l‘un des articles 196 à designated under subsection 250(2). 199— de la législation de toute province qui n‘a pas été désignée au titre du paragraphe 250(2). 254. Sections 250 to 253 cease to have effect on the day that may be 254. Les articles 250 à 253 cessent fixed in an order of the Governor in d‘avoir effet à la date que le Council on the recommendation of the gouverneur en conseil peut préciser Minister, but the Governor in Council par décret sur recommandation du No.: 200-09-006746-090 PAGE: 26 may make the order only if all of the ministre; il ne peut prendre le décret provinces have been designated under qu‘une fois que toutes les provinces subsection 250(2). ont été désignées en vertu du paragraphe 250(2). [Emphasis added.] [Soulignements ajoutés.]  From these provisions, only a few of which will be implemented immediately across the country, it appears that the regime set out in the proposed Act is designed to apply to the entire country, but through an opt-in by the individual provinces. Thus, at first glance, the regime is optional. Each province that wants to adhere to the system can make a request, which, as we can see from the proposed Act and the explanations provided by the Attorney General of Canada, would involve the province abandoning its own legislation. The Governor in Council will not designate a province unless he or she is convinced that the single securities regulatory regime will apply in that province. That means that, throughout each participating province, the only securities regulatory regime will be the federal regime (section 250). In the provinces that do not wish to participate, only the provincial securities regulatory regime will apply, subject to a few of the provisions of the federal regime (see sections 251 and 252 above).  This transitional regime is certainly creative and perhaps it is a new and original example of cooperative federalism (politico-strategically, at least). It is perhaps not contrary to the principle according to which a federal law can apply to only one part of the country. That being said, it has little, if anything, to do with the double aspect theory, at least as we have traditionally understood it.  This theory is concerned with the simultaneous co-existence of federal and provincial legislative provisions in the same jurisdiction. It is not concerned with the co- existence of regimes that are mutually exclusive that would exist in different jurisdictions. In this case, the federal authorities do not anticipate that the proposed Act will be applied in conjunction with or parallel to provincial legislation, each covering a particular aspect of securities regulation. Rather, it is expected that where federal legislation comes into force through provincial opt-in, it will be the only applicable legislation. Once again, and at the risk of repeating ourselves, this is not an example of the double aspect theory, but rather, a variation on the theme of exclusive powers.  There is only one explanation for this approach to implementing the legislation: the co-existence of the federal regulatory system and a provincial system within the same jurisdiction is impossible because both systems claim to be comprehensive and because both essentially deal in a similar way with what we will interchangeably refer to as commerce, the market or the securities industry. In short, they have the same ―pith and substance‖. No.: 200-09-006746-090 PAGE: 27  We agree that convergence or even duplication of provincial and federal provisions is the ultimate in harmony, to reiterate the expression advanced by Dickson J. in Multiple Access Ltd.,33 but what can be clearly accepted when simply dealing with individual legislative provisions34 can become problematic, even impossible, when dealing with complete regulatory systems pursuing the same objectives by similar means, as is the case here.  In Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail),35 Beetz J. described the true nature of the double aspect theory: It follows from this theory that two relatively similar rules or sets of rules may validly be found, one in legislation within exclusive federal jurisdiction, and the other in legislation within exclusive provincial jurisdiction, because they are enacted for different purposes and in different legislative contexts which give them distinct constitutional characterizations. Thus the prohibition from driving a motor vehicle imposed following a conviction for driving while intoxicated may be the penalty for a criminal offence, validly enacted by Parliament, just as the suspension of a driving licence may be validly prescribed by a province for highway safety reasons: Provincial Secretary of Prince Edward Island v. Egan, 1941, S.C.R. 396. Similarly, false prospectuses may be the subject of valid federal legislation from the criminal law standpoint, as well as of equally valid provincial legislation from the standpoint of regulating securities trading: Smith v. The Queen, 1960, S.C.R. 776. Similarly, rules regarding ―insider trading‖ may be regarded as belonging to corporate law within exclusive federal jurisdiction in the case of federally- incorporated companies and as regulation of trade in securities within exclusive provincial jurisdiction, applicable to federally-incorporated companies, provided the latter are not singled out and their essential powers are not impaired: Multiple Access Ltd. v. McCutcheon, 1982, 2 S.C.R. 161. So too public nudity may be prohibited by Parliament in a criminal law context, and also be the subject of provincial regulation of entertainment in public houses 33 Supra note 12 at 190. 34 As was the case in Multiple Access Ltd., in which it was held that the virtually identical provisions of sections 113 and 114 of the Ontario Securities Act and ss. 100.4 and 100.5 of the Canada Corporations Act could coexist. According to the Supreme Court, these provisions dealt with all companies‘ insider trading with respect to their securities. Sections 113 and 114 were considered to be valid under constitutional jurisdiction of the provinces, while ss. 100.4 and 100.5 were considered to fall under the federal jurisdiction of business corporations (corporate law), because they are narrowly associated to the material particulars in federally-incorporated companies. Given that the provisions are consistent and devoid of any contradictions, the Court concluded that they could co-exist, without invoking the doctrine of paramountcy. 35  1 S.C.R. 749. No.: 200-09-006746-090 PAGE: 28 operated under a provincial licence: Rio Hotel Ltd. v. New Brunswick (Liquor Licencing Board), 1987, 2 S.C.R. 59. However, in Attorney-General for Canada v. Attorney-General for Alberta, 1916, 1 AC 588, Viscount Haldane issued a warning about the double aspect theory. This is what he said about this theory, at p. 596: ...[it] is now well established, but none the less ought to be applied only with great caution... The reason for this caution is the extremely broad wording of the exclusive legislative powers listed in ss. 91 and 92 of the Constitution Act, 1867 and the risk that these two fields of exclusive powers will be combined into a single more or less concurrent field of powers governed solely by the rule of paramountcy of federal legislation. Nothing could be more directly contrary to the principle of federalism underlying the Canadian Constitution: see Laskin’s Canadian Constitutional Law (5th ed. 1986), vol. 1, at p. 525. The double aspect theory is neither an exception nor even a qualification to the rule of exclusive legislative jurisdiction. Its effect must not be to create concurrent fields of jurisdiction, such as agriculture, immigration and old age pensions and supplementary benefits, in which Parliament and the legislatures may legislate on the same aspect. On the contrary, the double aspect theory can only be invoked when it gives effect to the rule of exclusive fields of jurisdiction. As its name indicates, it can only be applied in clear cases where the multiplicity of aspects is real and not merely nominal.36 [Emphasis in original]  Further, noting that the legislative schemes in question, Quebec‘s Act respecting occupational health and safety37 and what was then the Canada Labour Code Part IV38 pursue the same objectives by similar means, Beetz J. concluded that: I think it is wrong to speak of double aspect in another way. An examination of the preventive scheme of the Act and the preventive scheme created by the federal legislator in Part IV of the Canada Labour Code demonstrates that both legislators are pursuing exactly the same objective by similar techniques and means. A comparison of the statement of principle in each statute leaves no doubt as to the similarity of their purposes: ... The exact correspondence of these two objectives indicates that there are not two aspects and two purposes depending on whether the legislation is federal or provincial. In my opinion, the two legislators have legislated for the same purpose 36 Ibid. at 765 and 766. 37 R.S.Q., c. S-2.1. 38 R.S.C. 1970, c. L-1 (mod.1977-78, c. 27). No.: 200-09-006746-090 PAGE: 29 and in the same aspect. Yet they do not have concurrent legislative jurisdiction in the case at bar, but mutually exclusive jurisdictions. In this regard the Attorney General of Quebec argued that the provisions of Part IV of the Canada Labour Code were adopted by Parliament not pursuant to its exclusive jurisdiction over federal undertakings but under its ancillary jurisdiction, analogous to that which it might perhaps exercise if it were to create a workmen's compensation scheme for federal undertakings. I have already had occasion to discuss this. As they deal with the labour relations and the management of federal undertakings, the provisions of Part IV of the Canada Labour Code in my opinion fall within the exclusive jurisdiction of Parliament which, as we saw earlier, would otherwise be stripped of any distinct or meaningful content. [emphasis in original]39  This passage can be entirely applied to the case at bar: an examination of the regulatory scheme referred to in the proposed Act and the existing scheme under provincial legislation, particularly those of Quebec and Alberta, demonstrates that legislators are pursuing exactly the same objective by similar techniques and means. The identity of the regimes demonstrates that there are not two aspects or two purposes depending on whether the legislation is federal or provincial. If the proposed Act were enacted by Parliament, all legislators would have legislated for the same purposes and under the same aspect. In the present case, however, they do not have a joint legislative jurisdiction over securities and there is no need to create one by means of the double aspects doctrine.  In our opinion, this theory cannot be applied in this case. Rather, it is through the lens of exclusive powers (with the qualification of the ancillary power doctrine, if necessary) that we should be examining the debate, which involves subsections 91(2) and 92(13) of the Constitution Act, 1867. On this point, therefore, we also agree with the Court of Appeal of Alberta.40 b. Securities and subsection 92(13) of the Constitution Act, 1867  Provincial jurisdiction over securities regulation and its connection to subsection 92(13) of the Constitution Act, 1867, have been repeatedly recognized in Judicial Committee of the Privy Council reports and by the Supreme Court of Canada. Examples include: Lymburn v. Mayland,41 Smith v. The Queen,42 Gregory and Co. Inc. v. Quebec Securities Commission,43 Multiple Access Ltd. v. McCutcheon44 and Global 39 Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail), supra note 35 at 852–853. 40 Reference re Securities Act (Canada), supra note 19 at paras. 45 and 46. 41 1932, A.C. 318. Litigation regarding registration requirement. 42  S.C.R. 776. Litigation regarding validity of prospectuses under provincial law. 43  S.C.R. 584 Litigation regarding the application of the Quebec law regulating securities in transactions between a Quebec broker and his clients outside the Province. 44 Supra note 12. Litigation regarding the validity of some sections of a provincial law on securities as they would apply to the directors of a national private corporation. No.: 200-09-006746-090 PAGE: 30 Securities Corp. v. British Columbia (Securities Commission).45 In the latter decision, Iacobucci J. wrote the following, on behalf of the Supreme Court: 40 I conclude that the ―pith and substance‖ of s. 141(1)(b), as described above, falls within the scope of s. 92(13) of the Constitution Act, 1867, ―Property and Civil Rights in the Province‖. Section 141(1)(b)‘s dominant purpose is the effective regulation of domestic securities, a task that has long been recognized to fall within provincial authority: see Multiple Access Ltd. v. McCutcheon, 1982 CanLII 1266 (S.C.C.),  2 S.C.R. 161, at pp. 183-85; Smith, supra; Lymburn, supra. 41 Moreover, it is well established that the provinces‘ authority over securities regulation is not limited to purely intraprovincial matters. In Gregory, supra, the Quebec-based broker in question was prosecuted solely for transactions outside the province. This Court nonetheless held that Quebec had a legitimate interest in those transactions. Conversely, in R. v. W. McKenzie Securities Ltd. (1966), 56 D.L.R. (2d) 56, the Manitoba Court of Appeal held that a province can regulate a broker located outside the province if that broker transacts with clients within the province.  This passage is particularly interesting in that Iacobucci J. does not simply recognize that, in this case, paragraph 141(1)(b) of the contentious provincial act is a matter that falls within property and civil rights and, consequently under subsection 92(13) of the Constitution Act, 1867. Iacobucci J. goes on to recognize explicitly that, by virtue of this provision, ―effective regulation of domestic securities‖ in the province falls under provincial jurisdiction (as recognized for investor protection: see Gregory & Co. Inc. v. Quebec Securities Commission46). Furthermore, it must be noted that Iacobucci J.‘s ruling was made in a context where the legislation at issue was a modern statute that already encompassed the previously defined attributes.47 Thus, 45 Supra note 23. Litigation regarding legislation in British Columbia allowing the securities commission to ―gather information for securities regulators in other jurisdictions‖ (para. 1). 46 Supra note 43 at 590 (Fauteux J., for the majority): Nor is this conclusion affected by the decisions rendered in a group of cases referred to by counsel for the appellant, where the incidence of export trade of farm products on the validity of certain provincial marketing acts was considered; ... The Act Respecting Securities, 3-4 Elizabeth II, c. 11, is not marketing legislation within the meaning attending the legislation considered in these cases. In order to protect the public against fraud, it provides for the establishment and operation of a control and supervision over the conduct, in the Province of Quebec, of persons engaged, therein, in carrying on the business of trading in securities or acting as investment counsel. The object of the Act, as shown by its provisions, is similar to that of the Securities Fraud Prevention Act, 1930, of Alberta, which was considered Lymburn and another v. Mayland and Others and where Lord Atkin, with reference to Part I entitled ―Registration of brokers and salesmen‖, said at p. 324: There is no reason to doubt that the main object sought to be secured in this part of the Act is to secure that persons who carry on the business of dealing in securities shall be honest and of good repute, and in this way to protect the public from being defrauded. 47 Securities Act, R.S.B.C., 1996, c. 418, whose general structure and topics already resemble those of the proposed Act, as can be judged by the title of certain sections: Part 1 – Interpretation; Part 2 – The Commission; Part 4 – Self Regulatory Bodies and Exchanges; Part 5 – Registration; Part 6 – Exemption from Registration Requirements; Part 7 – Trading in Securities Generally (where certain No.: 200-09-006746-090 PAGE: 31 Iacobucci J. is of the opinion that securities regulation in all its areas (standards of conduct for participants and market stakeholders, information, etc.), falls under subsection 92(13) of the Constitution Act, 1867. Iacobucci J. is also of the opinion that provincial jurisdiction in this matter is not strictly limited to intraprovincial matters, but that it can also have a bearing on interprovincial (or international) matters.  That securities regulation would fall under property and civil rights, as interpreted by subsection 92(13) (in private law rights48) is not surprising, since the securities market (or trade) operates on a contractual basis (like all markets, may we add 49). It is a question of buying, selling or trading property – in this case, securities issued by a corporation in order to finance its activities – directly or through an intermediary, on the primary or secondary market.50Although it is true that issuing securities is not a contractual transaction in and of itself, the existing regulation, which focuses on the requirements for the prospectus so that anyone who acquires or buys securities – be it a corporate body or an individual person, a broker, or an investment fund, etc. – does so with full knowledge, as previously mentioned. From a judicial point of view, the legal obligations regarding the prospectus can be seen as an expression of the general responsibility to provide information that rests with any contracting party in any field, be it in civil or common law,51 to varying extents and with the adaptations required by the property in question here.  Imposing standards of conduct for market stakeholders and monitoring them are similarly components in the regulation of what we referred to as the transactional environment, which also has a nexus to private law in the province. Overall, the practices are forbidden); Part 9 – Prospectus; Part 10 – Exemption from Prospectus Requirements; Part 11 – Circulation of Materials; Part 12 – Continuous Disclosure; Part 13 – Take Over Bids and Issuer Bids; Part 14 – Proxies; Part 16 – Civil Liability; Part 17 – Investigations and Audits; Part 18 – Enforcement. 48 See reasons of Robert C.J.A. at paras. 121 – 130. See also Peter W. Hogg,. Constitutional Law of Canada, loose-leaf ed.(Toronto: Carswell, 2007)at 21 – 2 and 21 – 3. 49 It should be noted that in common language, the notion of a ―market‖ in all its permutations is based on a contract (including the definitions that refer to the place where commercial transactions are made and where all kinds of goods and services are exchanged). In a financial context, see the following definition: [TRANSLATION] Commercial and financial operations dealing with a category of goods in a specific geographical area; this area; the people who perform commercial transactions... Economically speaking, the term ‗market‘ refers to a geographical area, or a group of people who are in a business relationship to sell or buy a product in conditions such as transactions...tend to be conducted at the same time and at the same price... ‗market‘ also refers to the mass of offers and requests that come together (in these business centres). Reboud & Guitton, Précis d’économie politique, t.l., at 377 (Le Grand Robert de la langue française, 2d ed., electronic version, ed. Alain Rey (Paris: Le Robert, 2001), ―marché‖). 50 For a partial analysis of the contractual relationship between market stakeholders, see: Julie Biron & Stéphane Rousseau, ―Pérégrinations civilistes autour de la relation entre l’intermédiaire de marché et l’investisseur” (2010), 44 R.J.T. 261. 51 S.M. Waddams, The Law of Contracts, 6th ed. (Toronto: Canada Law Book, 2010) at 8, para. 9. No.: 200-09-006746-090 PAGE: 32 conditions under which these securities are traded and the manner in which they are traded must be regulated by monitoring the activities of stakeholders (many of whom are often also contracting parties), as they can have an impact on the data that the investor needs in order to transact properly.  It goes without saying that civil liability in these matters (under general law rules or a special regime52) falls within the purview of subsection 92(13) of the Constitution Act, 1867, and nothing more will be said on that matter.  By virtue of their subject matter, as much as their objectives (investor protection and effective regulation of the securities market) provincial laws deal with property and civil rights and are therefore indeed valid under subsection 92(13) of the Constitution Act, 1867.  Some will perhaps protest that the interprovincialization and internationalization of the securities market impedes our ability to refer to ―Property and Civil Rights in the Province‖. We are of the opinion that such is not the case. Dealing with the behaviour of stakeholders who are in a province – even if these stakeholders are dealing with contracting parties from outside the province – is a provincial matter (as recognized by the case law in, for example, Gregory53). To require an issuing corporation to conform to existing provincial regulations regarding prospectuses in the province where the corporation is headquartered, operates or where it sells its shares remains a provincial matter (even if the shares issued can be purchased out of province or if the corporation has to comply with requirements in force, under similar circumstances, in other provinces where the shares could be distributed). A contract is still concluded in a province even if the contracting party is outside the province (subject to the rules of private international law, which also falls under provincial jurisdiction as per subsection 92(13) of the Constitution Act, 1867).54 As a further example, a stock exchange (a ―market‖ in the strictest sense of the term, that is to say a place where 52 This is now the case in Quebec and in other provinces: see ss. 213.1 et seq. of the Securities Act, R.S.Q., c. V-1.1. 53 Supra note 43. 54 There is value in referring to the Supreme Court decision in Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Ontario Securities Commission),  2 S.C.R. 132, where, in a context other than the division of constitutional jurisdiction, the securities industry falls under many concurrent regulatory jurisdictions, (para. 62). Nevertheless, the Supreme Court is of the opinion that the Ontario Securities Commission handed down a reasonable decision by concluding that it did not need to intervene in the absence of a sufficient transactional connection between the operation put forward for its attention (the purchase offer from the Société des actions de la Société Asbestos by the Société nationale de l'Amiante) and Ontario. Iacobucci J., writing on behalf of the Supreme Court, concluded that ―Thus, the OSC‘s insistence on a more clear and direct connection with Ontario in this case reflects a sound and responsible approach to long-arm regulation and the potential for conflict amongst the different regulatory regimes that govern the capital markets in the global economy.‖ (par. 62). The approach thus embodied, which in some ways harks back to the doctrine of forum non conveniens, confirms that international private law has its place in regulating interprovincial and international transactions and also confirms that it is not unfathomable that a single transaction could be simultaneously subject to concurrent jurisdictions, geographically speaking. No.: 200-09-006746-090 PAGE: 33 goods are exchanged commercially) is still considered local even though people from jurisdictions outside the province interact, either virtually or in person. The decision in Global Securities Corp.55 established that provinces can initiate cooperation agreements in the area of securities with other provincial or international jurisdictions without undermining their jurisdiction. Canadian provinces actively pursue these agreements, particularly in regards to the passport system established among them (with the exception of Ontario).56  This is to say that the interprovincialization or internationalization of the market, in the economic sense of the term, does not signify that the transactions will not be conducted in a province, or that the province cannot regulate the conduct and the obligations of the stakeholders who, for one reason or another, are in its territory or doing business in it.  The decision rendered by the Supreme Court in Consolidated Fastfrate Inc. v. Western Canada Council for Teamsters57 reinforces this opinion. In that decision, the question was asked whether the appellant‘s labour relations should be regulated by the Canadian Labour Code or by the Alberta law. To answer that question, it was necessary to characterize the employer‘s undertaking, in constitutional terms, which required that paragraph 92(10)(a) of the Constitution Act, 1867 be considered: Were the operations of the appellant, who operated a freight forwarding service, subject to this provision? If that had been the case, the company would have fallen under federal jurisdiction and, consequently, the labour relations within them. Rothstein J., for the majority, described Fastfrate‘s operations as follows:  This appeal concerns freight forwarding – an industry in which companies consolidate and deconsolidate freight and contract for its shipment with third- party rail and truck carriers, including interprovincial ones. Fastfrate provides consolidation and deconsolidation and pickup and delivery services to its customers across Canada. It typically acts as the consignor and consignee for the third-party carrier such that customers receive a single bill of lading. The question in this case is whether Fastfrate‘s provision of such services qualifies it as an interprovincial undertaking even though it does not itself perform any interprovincial carriage of goods.  By analyzing paragraph 92(10)(a), Rothstein J. concluded that this provision does not apply to the operations at issue, which remain provincial. He explains that:  The difficulty with this argument is that the text of s. 92(10)(a) and the jurisprudence interpreting it do not contemplate that a mere contractual 55 Supra note 23. 56 For a presentation on the agreements in this matter, see: Stéphane Rousseau, op. cit., note 25 at 90 to 115, Evidence of the Attorney General of Quebec, Vol. IV, at 1048 – 1073. This type of agreement also exists in other areas, including supplemental pension plans: see Boucher v. Stelco Inc. [ 2005] 3 S.C.R. 279 (it does not deal with the division of powers but discusses international private law). 57  3 S.C.R. 407. No.: 200-09-006746-090 PAGE: 34 relationship between a shipper and an interprovincial carrier would qualify Fastfrate as an undertaking connecting the provinces or extending beyond the limits of the province. Rather, it is the carriers that physically transport the freight interprovincially that constitute federal transportation works and undertakings. There is no indication that contracting alone can make intraprovincial undertakings subject to federal jurisdiction. I am not persuaded that there is a justifiable basis for expanding the scope of s. 92(10)(a) in the manner proposed by the Teamsters. [Emphasis added]  And further on:  There has also been discussion in the lower courts of the fact that Fastfrate is an integrated national company with branches across Canada. The case law has consistently held that corporate structure is not determinative of the jurisdictional analysis under s. 92(10)(a). As this Court affirmed in Northern Telecom, at p. 133, ―the judgment is a functional, practical one about the factual character of the ongoing undertaking and does not turn on technical, legal niceties of the corporate structure or the employment relationship‖. In my view, the functional analysis must centre on what operations the undertaking actually performs.  That is to say that even if it has contractual relations with persons located outside the province, and even if this constitutes the bulk of its services, such an undertaking remains provincial. Neither the operational reality (national) nor the organizational structure (also national) of Fastfrate were therefore found to be sufficient to make this undertaking something other than a provincial undertaking, and more specifically an intraprovincial undertaking that cannot be regulated by Parliament under paragraph 92(10)(a) of the Constitution Act, 1867.  In our opinion, and even if the constitutional context of that case differs from ours because the federal powers at play were those of paragraph 92(10)(a), this way of seeing things can be adapted to securities regulations. We can compare the operations of shipping brokers (who offer carrier services) to those of brokers or even stock exchanges (that offer property, that is, securities). We do not see why the second ones would be less ―provincial‖ (that is, intraprovincial) than the first. Neither the extraprovincial contractual relations nor the national dimension of the operations suffice to cause an undertaking to no longer conduct its operations in a province, and the same goes for securities as well.  Rothstein J. added the following in the same case:  Even where a recognized federal undertaking exists, not every part of its enterprise will necessarily be subject to federal jurisdiction. Distinct local works or undertakings may remain subject to provincial jurisdiction. In the Empress Hotel case (Canadian Pacific Railway Co. v. Attorney-General for British Columbia,  A.C. 122 (P.C.)), the issue was whether the employees of a hotel owned and operated by the CPR were subject to federal regulation. The appellants in No.: 200-09-006746-090 PAGE: 35 that case argued that the hotel‘s employees were subject to federal regulation because the hotels were part of an integrated national transportation system. They maintained that th[e] unified system [of rail and hotel services] is a national [transportation] undertaking which cannot reasonably be viewed as a conglomeration of local works and undertakings.... The Empress Hotel [as the material in the record shows] is an integral part of this unified system. [p. 127]  The Privy Council rejected this argument. Lord Reid said, at p. 140: [T]heir Lordships can find neither principle nor authority to support the competence of the Parliament of Canada to legislate on a matter which clearly falls within the enumerated heads in s. 92 and cannot be brought within any of the enumerated heads in s. 91 merely because the activities of one of the parties concerned in the matter have created a unified system which is widespread and important in the Dominion. [Emphasis added.] Lord Reid distinguished between CPR‘s operation of a national transportation undertaking and the Empress Hotel‘s local role within that system. In other words, the common ownership of complementary interprovincial and intraprovincial works or undertakings will not mean that the otherwise local enterprise is subject to federal regulation, unless it forms an integral or essential part of the interprovincial work or undertaking. This is true even where, as Lord Reid says, the commonly owned undertakings create a ―unified system‖. In the case of Fastfrate, which conducts only local operations, I am not persuaded that its contractual relations with third-party carriers should attract federal jurisdiction any more than the Empress Hotel‘s operational and corporate relationship with the CPR did.  The operational reality of Fastfrate is that it depends on third-party interprovincial carriers to conduct its business. It is in precisely the inverse situation of those undertakings that have been found to be subject to derivative federal jurisdiction because they are integral to a recognized interprovincial work or undertaking. As Professor Hogg observes, ―[t]he relationship of dependency that will bring a local undertaking into federal jurisdiction is the dependency of the interprovincial undertaking on the local undertaking, not the other way around‖ (p. 654). This accords with the Federal Court of Appeal‘s observation in Cannet that ―the only interprovincial undertaking involved...is that of the CNR and that a shipper on that railway from one province to another does not, by such activity, become the operator of an interprovincial undertaking‖: p. 182 (per Heald J., agreeing with Jackett C.J.‘s comments at p. 178). I share the view that Fastfrate remains a shipper. Its presence at both the originating and terminating ends may mean that it can provide a comprehensive service to its customers, but this does not change the fact that it is still only a shipper using an interprovincial railway or trucking company.  In our opinion, that disposes, by analogy, of the claim that a certain importance must be accorded in view of the fact that the major Canadian brokerage firms are now the property of banks, which would indicate an integration such that it would make it difficult to consider that the operations of such firms would still be conducted in the province, under subsection 92(13) of the Constitution Act, 1867, having become a No.: 200-09-006746-090 PAGE: 36 component of the banking system. The Supreme Court stated that banks that enter into the insurance field are no less subject to the provincial laws in the matter, 58 which comes under subsection 92(13),59 and it would be no different if they decided themselves to enter into securities trading. That they instead chose to do it indirectly by acquiring brokerage firms is no more significant, constitutionally speaking.  Lastly, in Fastfrate, Rothstein J. also wrote the following on the importance that must be accorded to jurisprudence in terms of sharing constitutional authority.  In the present case, there is an existing body of freight-forwarding jurisprudence that has been cited approvingly by our Court. Where no convincing reason has been shown as to why we should depart from this jurisprudence, parties should be able to rely on it and organize their affairs accordingly.  As we know, this is also the case with securities, and there is no need to depart from the jurisprudence unless there is a compelling reason to do so. It must also be compelling in order to avoid constitutional instability. Not to exclude that the scope of the constitutional powers can never be reinterpreted and, as Laskin C.J. wrote in R. v. Zelensky,60 ―[n]ew appreciations thrown up by new social conditions, or reassessments of old appreciations which new or altered social conditions induce make it appropriate for this Court to re-examine courses of decision on the scope of legislative power when fresh issues are presented to it, always remembering, of course, that it is entrusted with a very delicate role in maintaining the integrity of the constitutional limits imposed by the British North America Act‖.61 This is indeed a delicate role and only a compelling reason can justify altering an established constitutional balance, especially when the question, which in this case concerns securities, is not new.  Thus, this compelling reason, as the Attorney General of Canada and the Canadian Bankers Association submitted, can be found in the general branch of subsection 91(2) of The Constitution Act, 1867. This is what we will now examine. c. Securities and subsection 91(2) of the Constitution Act, 1867  Some preliminary observations are in order.  It should first be noted, but without repeating what Dalphond J.A. expressed (paragraphs 418 et seq.), that Parliament has already made some notable incursions in securities regulations, owing to its statutory powers in other areas, such as criminal law, corporate law and banking.62 See: Multiple Access Ltd. v. McCutcheon,63 Bell Canada v. Quebec (Commission de la santé et de la sécurité du travail).64 A chapter on securities 58 Canadian Western Bank v. Alberta,  2 S.C.R. 3. 59 Jurisdiction since Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96. 60  2. S.C.R. 940 at 951. See aslo: R. v. Big M Drug Mart,  1 S.C.R. 295 at 335. 61 See also: Canadian Western Bank v. Alberta, supra note 58 at para. 23. 62 Generally, see: Peter W. Hogg, op. cit., note 48 at 21–25. 63 Supra note 12. 64 Supra note 35 at 765 and 766. No.: 200-09-006746-090 PAGE: 37 firms was recently added to the Bankruptcy and Insolvency Act.65 The Payment Clearing and Settlement Act also deals with some aspects of the securities market.66 We also learned in the news recently that the federal government has reviewed the London Stock Exchange‘s purchase of the Toronto Stock Exchange, under the Investment Canada Act67 (under the first branch of the federal trade and commerce power).  The question here, however, is not whether, incidental to its power over another subject matter under section 91 or subsection 92(10), Parliament may regulate certain aspects of trade or of the securities market. Rather, it is whether, as contemplated in the proposed Act, it may enact a general and comprehensive securities regulatory scheme across Canada. As Professor Hogg wrote: ... The hard question is whether the trade and commerce power could cover even transactions which, regarded individually, begin and end in one province, on the basis that the securities industry serves a capital market which is interprovincial and indeed international.68  Subsection 91(2) of the Constitution Act, 1867 confers on Parliament a power with two distinct branches: (1) power over international and interprovincial trade; and (2) general power over trade and commerce.69 Under this second branch, the federal power encompasses aspects of intraprovincial trade. In the present case, the Attorney General of Canada is relying on this second branch of subsection 91(2). Parliament could undoubtedly legislate on the strictly international and interprovincial aspects of the securities market or trade, but this is not what it has chosen to do with the proposed Act and we do not consider it necessary to ask how and in what way it could have done so.  Furthermore, it must be recalled that competition, as such, between the general federal power emanating from subsection 91(2) and the provincial power emanating from subsection 92(13) requires a particular interpretation, which means that neither one of these provisions voids the other of its meaning or neutralizes it. As Dickson J. wrote in General Motors of Canada Ltd. v. City National Leasing,70 ―[t]he true balance between property and civil rights and the regulation of trade and commerce must lie somewhere between an all pervasive interpretation of s. 91(2) and an interpretation that renders the general trade and commerce power to all intents vapid and meaningless‖. 71 In the same vein, but in other words, MacLachlin C.J. in Reference re Assisted Human 65 R.S.C. (1985), c. B-3, Part XII (Securities Firm Bankruptcies). 66 Supra note 20, which expressly includes the clearing of and payments for securities (s. 2, ―clearing and settlement scheme‖). We are not ruling on the constitutionality of this act. 67 R.S.C. (1985) c. 28 (1st suppl.) 68 Peter W. Hogg, op. cit., note 48 at 21–25. 69 See: General Motors of Canada Ltd. v. City National Leasing,  1 S.C.R. 641. See also: Peter W. Hogg, op. cit., note 48 at 20–2. 70 Supra note 69. 71 Ibid. at 660. See also the dissent of Dickson J. in A.G. (Can.) v. Can. Nat. Transportation, Ltd.,  2 S.C.R. 206 at 265, in fine at 267 No.: 200-09-006746-090 PAGE: 38 Reproduction Act,72 stated that ―extensions that have the potential to undermine the constitutional division of powers should be rejected‖. This comment pertains to criminal law, but it also applies to the general branch of the power conferred on Parliament by subsection 91(2), which has the same expansive potential.  In addition, a certain number of rules must be considered when interpreting the Parliament‘s general trade and commerce power, which form its context.  First, the economy in itself is not a head of power under the Canadian constitution: Re: Anti-Inflation Act.73 As Beetz J. stated in that case, economy is only an aggregate74 of several subjects, some of which fall within federal jurisdiction and others within provincial jurisdiction.75 Thus, section 91 of the Constitution Act, 1867 conferred on Parliament the ability to legislate on a series of defined sectors, which are essentially economic, and on certain national economic policy instruments: currency and coinage (subsection 14), banking and the issue of paper money (subsection 15), savings banks (subsection 16), bills of exchange (subsection 18), interest (subsection 19), and bankruptcy (subsection 21). From the beginning, it has been suggested that the provincial jurisdiction be removed, which would seem essential for such a national economic policy. Subsection 92(13) covers private law, which includes, needless to say, everything having to do with contracts, which themselves suggest all business, all trade and all markets. The dividing line between the powers, however, as can be seen, is not the economy as such. Consequently, without calling for a petty interpretation of subsection 91(2), care should be taken not to give a purely economical interpretation that is so broad that, in practice, it renders the other particular heads of federal power useless, or supersedes subsection 92(13).  In the same way, it is not because a subject is of interest to all Canadians or pertains to their general well-being that it inevitably becomes a federal power. In our opinion, Re: Anti-Inflation Act put an end to this kind of reasoning. R. v. Crown Zellerbach Canada Ltd.76 confirms this by reducing the theory of national interest or national dimensions to the idea that the subject-matter of the law must have a ―singleness, distinctiveness and indivisibility that clearly distinguishes it from matters of provincial concern‖.77 This is definitely not the case with a matter as broad as the ―economy‖ or the ―national economy‖. Nor can we infer from the fact that Canada is (among other things) an economic union, the constitutional consequence that its 72 Supra note 6 at par. 43. 73 Supra note 10. 74 Ibid. at 458 75 Incidentally, this is also what the majority, per Iacobucci and Basatarche, recognize in Canadian Egg Marketing Agency v. Richardson,  3 S.C.R. 157 at para. 61. 76  1 S.C.R. 401. 77 Ibid. at 432. See also: Re: Anti-Inflation Act, supra note 10 at 458 (reasons of Beetz J.) See also: Friends of the Oldman River Society v. Canada (Minister of Transport),  1 S.C.R. 3 at 64, in which, citing Crown Zellerbach Canada Ltd., the environment is described as a ―diffuse subject‖ and an ―abstruse matter‖ with respect to the division of constitutional powers, descriptives which also apply well to the economy. No.: 200-09-006746-090 PAGE: 39 economy, in all of its facets, must be regulated in a unified way, and thus by the federal legislator. In this sense, one can speak of the market, instead of economy, but the same idea of such a national (or international) market, which is nothing more, legally speaking, than a ―bundle of rights‖, does not have the required singleness, distinctiveness, and indivisibility.  Finally, apart from undertakings referred to in paragraphs 92(10)(a) and (b) of the Constitution Act, 1867, which are inherently and in some way physically interprovincial or international (the territorial dimension being part of their constitutional definition), it is not because a person engages in an undertaking with a pan-Canadian or extraprovincial dimension that that undertaking automatically falls under federal jurisdiction.78  This must be kept in mind when examining the scope of subsection 91(2) of the Constitution Act, 1867, with regard to the general branch of the federal jurisdiction, in order to interpret this provision in a manner that is in keeping with the recognized precepts and does not sterilize them. It was after taking into account all of these factors, with an intrinsic concern for constitutional balance, that the Supreme Court gradually developed the test for examining whether a matter falls under Parliament‘s general trade and commerce power.  First suggested by Laskin J.A. in MacDonald v. Vapor Canada Ltd.79 and then refined by Dickson J. in A.G. (Can.) v. Can. Nat. Transportation Ltd.80 and General Motors of Canada Ltd. v. City National Leasing,81 this test was most recently expressed in Kirkbi AG v. Ritvik Holdings Inc.,82 written by LeBel J. 15 ... Pursuant to s. 91(2), the federal government has exclusive jurisdiction in relation to trade and commerce. In Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96, the Judicial Committee of the Privy Council distinguished two branches of federal power under s. 91(2): (1) the power over international and interprovincial trade and commerce, and (2) the power over general trade and commerce affecting Canada as a whole (―general trade and commerce‖). This interpretation of s. 91(2), which limits the scope of the federal trade and commerce power to these two branches, is intended to ensure a proper constitutional balance between the otherwise overlapping federal power over trade and commerce (s. 91(2)) and the provincial power over property and civil rights in the province (s. 92(13)): see A. K. Gill and R. S. Jolliffe, Fox on Canadian Law of Trade-marks and Unfair Competition (4th ed. (loose-leaf)), at p. 2-4. 78 Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters, supra note 57. 79  2 S.C.R. 134. 80 Supra note 71. 81 Supra note 69. 82  3 S.C.R. 302. No.: 200-09-006746-090 PAGE: 40 16 The ―general trade and commerce‖ category requires an assessment of the relative importance of an activity to the national economy as well as an inquiry into whether an activity should be regulated by Parliament as opposed to the provinces. To determine whether a particular issue requires national rather than local regulation, this Court has set out five criteria to be considered. These criteria are integrated into an assessment of whether federal legislation can be supported on the basis of Parliament‘s authority over general trade and commerce. They reflect principles which help distinguish the federal trade and commerce power from the provincial property and civil rights power. In two comprehensive decisions dealing with the second branch of s. 91(2) (Attorney General of Canada v. Canadian National Transportation, Ltd.,  2 S.C.R. 206; General Motors of Canada Ltd. v. City National Leasing,  1 S.C.R. 641), Dickson C.J. adopted and extended the three indicia initially set out by Laskin C.J. in MacDonald v. Vapor Canada Ltd.,  2 S.C.R. 134. These requirements ―serve to ensure that federal legislation does not upset the balance of power between federal and provincial governments‖ (City National Leasing, at p. 662). 17 The jurisprudence of our Court now recognizes that the following factors are hallmarks of a valid exercise of Parliament‘s general trade and commerce power: (i) the impugned legislation must be part of a regulatory scheme; (ii) the scheme must be monitored by the continuing oversight of a regulatory agency; (iii) the legislation must be concerned with trade as a whole rather than with a particular industry; (iv) the legislation should be of a nature that provinces jointly or severally would be constitutionally incapable of enacting; and (v) the failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country (City National Leasing, at pp. 662-63). These factors are not exhaustive and, to be valid, it is not necessary for federal legislation to satisfy all five criteria: In total, the five factors provide a preliminary check-list of characteristics, the presence of which in legislation is an indication of validity under the trade and commerce power. These indicia do not, however, represent an exhaustive list of traits that will tend to characterize general trade and commerce legislation. Nor is the presence or absence of any of these five criteria necessarily determinative. As noted in Canadian National Transportation, supra, at p. 268: The above does not purport to be an exhaustive list, nor is the presence of any or all of these indicia necessarily decisive. The proper approach to the characterization is still the one suggested in Parsons, a careful case by case assessment. Nevertheless, the presence of such factors does at least make it far more probable that what is being addressed in a federal enactment is genuinely a national economic concern and not just a collection of local ones. On any occasion where the general trade and commerce power is advanced as a ground of constitutional validity, a careful case by case analysis remains appropriate. The five factors articulated in Canadian National Transportation merely represent a principled way to begin the difficult task of distinguishing between matters relating to trade and commerce and those of a more local nature. (City National Leasing, at pp. 662-63) No.: 200-09-006746-090 PAGE: 41  This test was developed in the context of a challenge to the validity of a provision or of specific legislative provisions. Usually, the first question is whether the provision in question infringes on a provincial power. If this is not the case, the examination ends there. If it encroaches upon a provincial jurisdiction, we then move on to the above analysis: is the provision part of a scheme that satisfies the five criteria – which are actually indicia – recognized by the case law? If so, the scheme being validated under the general branch of subsection 91(2) of the Constitution Act, 1867, it must still be asked whether the impugned provision is sufficiently integrated into this scheme to be valid.83  In this case, it is not a particular legislative provision that is at issue (or even simply several provisions), but rather an entire Act, which, at first glance, encroaches – this is a poor word choice since the contemplated legislation purports to replace provincial legislation (eventually) on the matter – on a provincial power that has been recognized, heretofore, to legislate on securities. In fact, what is being suggested here, even if it has not been said so bluntly, is that because of the interprovincialization and internationalization of the securities business (or market) and its importance in the national economy, it should from now on be solely a federal power.  That being said, the five criteria set out by the Supreme Court are still what need to be considered in order to determine whether or not this proposed Act falls under the general branch of the federal trade and commerce power.84  How, then, do these criteria apply in this case?  It should be pointed out that, in our opinion, this exercise is not limited to finding a ―rational connection‖ between the matter of the law, that is to say, its purpose and its pith and substance, and subsection 91(2) of the Constitution Act, 1867. The expression ―rational connection‖ is scattered throughout the case law relating to the separation of constitutional powers. In Re: Anti-Inflation Act,85 it is considered in order to determine whether there was a rational connection between the impugned legislative measure (an act controlling profit margins, prices, dividends and salaries) and the purpose purportedly being sought by Parliament in enacting it (waging war on inflation, which jeopardizes the Canadian economy). General Motors of Canada Ltd. v. City National Leasing,86 in which the question was reviewed, featured a consideration of the rational connection between the federal legislative provision encroaching upon the provincial power (and which would otherwise be ultra vires) and the valid federal legislation into 83 For an explanation and thorough analysis of this method, see: General Motors of Canada Ltd. v. City National Leasing, supra note 69 at 671 et seq. 84 Some authors have been critical of these criteria. See for example: Noura Karazivan & Jean-François Gaudreault Desbiens, ―On Polyphony and Paradoxes in the Regulation of Securities within the Canadian Federation,‖ (2010) 49 Can. Business L.J. 1; Jean Leclair, ―‗Please, Draw Me a Field of Jurisdiction‘: Regulating Securities, Securing Federalism,‖ (2010) S.C.L.R. (2d) 555 at 589 et seq. 85 Supra note 10 at 423, 425 and 470. 86 Supra note 69 at 670-671and 683. No.: 200-09-006746-090 PAGE: 42 which it was integrated, giving it the sense of ―necessarily incidental‖87 or that of a provision that ―may take on a valid constitutional cast by the context and association in which it is fixed as a complementary provision‖.88 More recently, in Quebec (Attorney General) v. Lacombe,89 McLachlin C.J., for the majority, associated this ―rational connection‖ to the ancillary powers doctrine and concluded, after another review of the question, that:  Under the rational functional test used by Laskin J.A. in Papp, and repeatedly reaffirmed in the jurisprudence of this Court, ancillary powers will only save a provision that is rationally and functionally connected to the purpose of the legislative scheme that it purportedly furthers. It is not enough that the measure supplement the legislative scheme; it must actively further it.  In this case, we do not apply the ancillary powers doctrine, as it is not relevant.  On the contrary, the consideration of the validity of the impugned regime in light of the criteria, or more accurately the indicia, which define the general branch of the federal powers in trade and commerce, demands a thorough analysis, as required by General Motors. Let us now see how this applies here. i. The impugned legislation must be part of a general regulatory scheme  The parties barely discussed the first two conditions, undoubtedly because they are purely formal and are easy to satisfy, but also because the proposed Act appears to satisfy them, at least at first glance: it is part of a general securities regulatory scheme – in fact, it calls for the implementation of such a scheme – that will be monitored by the continuing oversight of a national regulatory agency, the Canadian Securities Regulatory Authority.90  Upon reflection, because of the transitional regime envisaged in section 250 et seq., it is perhaps appropriate to consider whether the proposed Act does indeed constitute a general regime, within the meaning that is to be given to the first criterion, which incorporates the idea of a national vocation.91As seen earlier, however, this transitional regime allows for one or several provinces to fall outside the scope of the Act. The Attorney General of Canada responded that, ultimately, for obvious policy and economic reasons, all provinces would fall within the scope of the Act, which will confirm the national and general character of the scheme, which is indeed its vocation. The Canadian Bankers Association submitted that it was deemed preferable to convince the 87 Ibid.at 671, by reference to Northern Telecom Ltd. v. Communications Workers of Canada,  1 S.C.R. 115. 88 Ibid., by reference to Vapor Canada, supra note 79. 89  2 S.C.R. 453. 90 This is what the Attorney General of Quebec seems to recognize at para. 75 of its factum, as does the Attorney General of Alberta at par. 111 of its factum, and the Barreau du Québec at para. 58 of its factum. 91 This is what appears to emerge from MacDonald v. Vapor Canada Ltd., supra note 79 at 161, in fine — 164, and A.G. (Can.) v. National Transportation of Canada, Ltd., supra note 71 at 267 et seq. No.: 200-09-006746-090 PAGE: 43 provinces to join the scheme rather than force them to do so. Legally, however, the result of the chosen method is the following: for an indeterminate and even permanent (at least theoretically) period of time, there could be a federal securities regime in some provinces and a provincial regime in each of the others. We are not certain that this corresponds to a general regulatory scheme within the meaning intended in Vapor Canada Ltd., General Motors and Kirkbi.  That being said, from a practical standpoint, it is not necessary to give a good deal of consideration to the question, since, ex hypothesi, it would be easy to remedy the problem, if there was one, by eliminating this transitional regime and by enacting a provision that imposes the envisaged scheme across Canada.  Let us now move on to the second criterion. ii. The scheme must be monitored by the continuing oversight of a regulatory agency  The proposed Act satisfies this second criterion, which is not being challenged. iii. The legislation must bear upon trade as a whole rather than a particular industry  This criterion has been the subject of vigorous debate: does the proposed Act concern trade as a whole or a particular industry? Does the proposed Act have the essence of legislation whose validity has been recognized under the general branch of the federal trade and commerce power (Competition Act and Trade-marks Act), or does it cover only one particular industry?  In his reasons, Robert C.J. concluded that:  Trading in securities is a special industry. The persons targeted by the proposed Act offer goods and services which are all part of the same category. Accordingly, issuers of securities, intermediaries, (including brokers, self-regulatory bodies, stock markets), and other actors (including rating organizations, investor compensation funds) are subject to regulatory requirements and to standards of conduct that have the same main objective: ensuring the protection of investors in the securities market. Issuers of securities obviously do business in various areas but all the other targeted persons deal only in the securities market. Conversely, it cannot be said that the persons targeted by competition and trade-marks do business in the ―field of competition‖ or in the ―field of trade-marks.‖ …  This reasoning is applicable to the present case. Contracts for security entitlements, contracts for the services of intermediaries, rules established by acknowledged and designated organizations, rules of conduct that apply to intermediaries, rules governing takeover and issuer bids, and so on, are all individually subject to provincial jurisdiction under subsection 92(13) of the No.: 200-09-006746-090 PAGE: 44 Constitution Act, 1867. Merely grouping them under the proposed Act does not suffice to make them valid.  Accordingly, although they have an impact on the economy as a whole, I find that the regulation of securities does not concern trade in general but transactions which are specific to a given industry and that the third indicium developed by case law has not been complied with.  We share that point of view.  While it is true that the proposed Act declares that it seeks to protect and foster the access of Canadians and of Canadian businesses to capital markets, which is indeed very important for the Canadian economy, it does this not by regulating trade or the market92 in general or an aspect of trade or the market in general, but by regulating only a specific sector of economic activity, namely securities (which are far from the only kind of capital present in the market). Moreover, it does this under much-defined aspects only, which are those that have already been discussed.  Undeniably, the proposed Act does not have the degree of generality that the Competition Act or the Trade-marks Act have, but that does not mean that only this type of legislation may be validated under the general branch of federal trade and commerce power. It is just as certain that the proposed Act has a higher degree of generality than the regulatory provisions that were at issue, for example, in Labatt v. Attorney General of Canada,93 which concerned the regulation of the beer industry. In short, the proposed Act lies between these two.  Nevertheless, although it covers ―securities in general‖, regardless of the sector of activity of the corporation that initially issued them, it does this in a way that basically targets the actors (or the participants and the interveners), that is, those who produce, distribute and circulate this particular product, namely securities.  In this perspective, it can thus be considered that it does not involve the regulation of trade in general but a particular segment, as would be the case if a statute sought to regulate the insurance94 or food industries.  The Attorney General of Canada and the Canadian Bankers Association submitted that this analogy does not hold because of the securities industry‘s importance in the Canadian economy and its purportedly unique and integrated nature. This point of view is shared by a number of authors, such as Robert Leckey and Eric Ward, who wrote the following: 92 To summarize this distinction, if there is one, between the two terms. 93  1 S.C.R. 914. 94 Citizens Insurance Company of Canada v. Parsons, supra note 59. No.: 200-09-006746-090 PAGE: 45 We suggest that analysis of the Canadian securities market as simply a co- existence of separate local industries is myopic. Such analysis focuses on individual transactions, not on the effect of the collective activity of securities market participants. Despite the popular term ―securities industry‖, ensuring the integrity of the markets and the availability of capital to businesses and of investment opportunities to individuals is much more than a single industry. It is not merely that many people and businesses across Canada participate in their local securities markets. Many products, including light beer, are consumed widely across the country, but fail to surpass their particularity to be classified as ―general‖. Rather, the securities markets form an integral part of the infrastructure of the Canadian economy. The provision of capital is more central to the broad spectrum of businesses than are other suppliers. Even if most companies purchase insurance of various kinds, insurance is not their lifeblood the way capital is. Hogg wrote that the capacity to raise capital is an essential attribute of corporate status; we suggest that it is an essential part of the Canadian economy.95 [Citations omitted.]  The argument is a serious one. It could, however, be said that it ignores the fact that securities do not represent the whole of the capital market; 96 it could also be said that it neglects the fact that it is not only the securities market that has ―surpassed its particularity‖, but all markets: the maple syrup market or even the pharmaceutical products market, which are now international and highly integrated.97 But above all, its main disadvantage, considering the established balance of federal-provincial relations, is that it implicitly proposes that, because it concerns the ―national‖ economy and a vital sector of that economy, federal jurisdiction should ensue. If that is the case, it changes the constitutional paradigm. The doctrine of national dimensions suddenly gains in importance, singularly under the pretext of the general jurisdiction under 95 Robert Leckey & Eric Ward, ―Taking Stock: Securities Markets and the Division of Powers,‖ (1999) 22 Dalhousie L.J. 250 at 272. See also: Noura Karazivan & Jean-François Gaudreault-Desbiens, loc. cit. note 84 at 15, in fine, and 16. 96 3d According to the Oxford Dictionary of Finance and Banking, ed. (Oxford University Press, 2005), which gives the following definition of a ―capital market‖, of which the securities market represents only one segment: A market in which long-term capital is raised by industry and commerce, the government, and local authorities. The money comes from private investors, insurance companies, pension funds, and banks and is usually arranged by issuing houses and merchant banks. Stock exchanges are also part of the capital market in that they provide a market for the shares and loan stocks that represent the capital once it has been raised. The Dictionnaire de l’Économie, coll. Encyclopaedia Universalis (Paris: Albin Michel, 2007) at 851 et seq., refers instead to a grouping made up of the money market, the financial market, the foreign exchange market, and the derivatives market. It is true, however, that the term ―capital market‖ (or ―markets‖), or ―marché des capitaux,‖ is also used as a synonym for the securities market, and more specifically the issuers and investors market. See Mokhtar Lakehal, Dictionnaire d’économie contemporaine et des principaux faits politiques et sociaux, d 3 ed. (Paris : Vuibert, 2002), ―Marché des capitaux‖. 97 We could refer here to the stereotype of the ―global village,‖ which can be seen most strongly in the area of trade. No.: 200-09-006746-090 PAGE: 46 subsection 91(2) of the Constitution Act, 1867. We are not persuaded that that is ―reconcilable with the fundamental distribution of legislative power under the Constitution‖ (to use a phrase from R. v. Crown Zellerbach Canada Ltd.).98  This being the case, it seems to us that we must conclude that the proposed Act, as it is formulated, targets a particular industry, which has been recognized for almost 80 years as falling under subsection 92(13) of the Constitution Act, 1867, and not trade in general. iv. The legislation should be of a nature that provinces jointly or severally would be constitutionally incapable of enacting  The fact that, by definition, the provinces cannot enact their respective legislation at the national level is obviously irrelevant – otherwise, this fourth condition would be pointless, and indeed meaningless, given that only Parliament may enact legislation nationwide. As Slatter J.A. writes in Reference re Securities Act (Canada):99  … (b) … The test is not whether any or all of the provinces could enact a national securities act; the test is whether the industry can be successfully regulated at the provincial level. It is a given that the provinces cannot enact legislation outside their borders; merely because the proposed federal statute applies all across the country is not sufficient: General Motors v. City National Leasing at pp. 659–60. …  If we rely only on the wording of the condition as worded by Dickson J.,100 what we must examine here is not the provinces‘ practical capacity or incapacity, but rather their constitutional capacity or incapacity. We note, however, that in General Motors of Canada Ltd. v. City National Leasing, the question of practical effectiveness formed part of the analysis. Therefore, the test seems to be two-pronged. In other words, the criterion requires both an examination of the provinces‘ legal capacity (do they have the constitutional capacity or not?) and an examination of the practical extent of this capacity (do they have the capacity to act effectively or not?).  The proposed Act fails both prongs of this test.  The reality is that, not only do the provinces have the constitutional capacity under subsection 92(13) of the Constitution Act, 1867, to regulate the securities market, but the extrinsic evidence unequivocally confirms that they have the capacity to do what the proposed Act sets out. They have been doing so for decades; their practices are, on the whole, consistent with industry benchmarks. In accordance with the applicable 98 Supra note 76 at 432. 99 Supra note 19. 100 ―The legislation should be of a nature that the provinces jointly or severally would be constitutionally incapable of enacting‖, General Motors of Canada Ltd. v. City National Leasing, supra note 69 at 662; Kirkbi AG v. Gestions Ritvik inc., supra note 82 at para. 17. No.: 200-09-006746-090 PAGE: 47 constitutional framework, they have implemented cooperation agreements that maximize their efficiency. Jointly and severally, they regulate the securities market, and they do this so well that the proposed Act merely borrows from the model they have developed.  Unlike competition, which Dickson J. stated ―cannot be effectively regulated unless it is regulated nationally,‖101 or trademarks, which would not have adequate protection if they were regulated provincially, it is entirely possible to regulate securities provincially. They have been regulated provincially for a long time now and in a manner that has put the Canadian system among the leaders in this field, including in the area of systemic risk prevention or management – in many cases, ahead of the United States (a federation endowed with a national, unified system of securities regulation).  The arguments put forward by the Attorney General of Canada and the Canadian Bankers Association regarding the fragmentation of the system, the duplication and complexity of procedures, the high system costs and the general inability of the provinces to manage the systemic risk are contradicted by this reality.  It is not within the scope of this fourth criterion, and therefore unnecessary here, to determine whether a unified system would be preferable to the current system, or to determine whether the federal government could do a better job than the provinces, or vice versa.  On the one hand, the experts do not agree on the matter, and it is not for us to rule on the question, except to state that the provinces, both jointly and severally, are accomplishing what the proposed Act intends to accomplish, and in approximately the same manner, as we have seen.  On the other hand, the mere fact that users of the current system (i.e., the interveners who are subject to it), or some users at least, may prefer to deal with a single regulator or feel that this would be more convenient for them (at least in theory), particularly in terms of costs, is not sufficient. The criterion is the capacity or incapacity of the provinces, not the desire of those who are subject to the system.  Finally, the very nature of the Canadian federation and the federal context by definition preclude us from making an absolute determination as to whether a unified system would be better than a non-unified system. That is not the question. The only question is whether or not the proposed Act is ―of a nature that provinces jointly or 101 General Motors of Canada Ltd. v. City National Leasing, supra note 69 at 680. As observed by Karazivan and Gaudreault-Desbiens, loc. cit. note 84 at 16, Dickson J. does not pursue the analysis very far beyond that statement. This is in part because of the extremely general nature of the act at issue, which is undoubtedly the standard example of the second prong of federal jurisdiction on trade and commerce; it is also because of the fact that the provinces had not enacted legislation dealing specifically with competition and introducing a control and oversight regime, relying instead on the common law. Therefore, Dickson J. was not required to pursue the comparison in more detail. The situation in the case at bar is entirely different. No.: 200-09-006746-090 PAGE: 48 severally would be constitutionally incapable of enacting.‖ Moreover, we know that this nature is, in substance, one of provincial legislation that legislatures are constitutionally empowered to enact under their property and civil rights jurisdiction.  In light of the Hockin report,102 which inspired the proposed Act, the Attorney General of Canada and the Canadian Bankers Association allege the systemic inefficiency resulting from variations among provincial securities laws. This is another way of advocating the intrinsic benefits of uniformity. If we were to agree with such a suggestion, not much would be left of the provinces‘ jurisdiction over property and civil rights.  The Attorney General of Canada also argues that the proposed Act would give Canada a single voice on the international stage, which would be an improvement compared to the current scheme in which Canada‘s interests are represented by provincial spokespersons.  This argument is specious.  Federal jurisdiction over international matters is well known and guided by the Constitution. Equally well known is the mechanism by which Canada, through the federal government as its international representative, enters into those international agreements it deems necessary, which are implemented in accordance with the protocol established by the Privy Council in Attorney-General for Canada v. Attorney-General for Ontario (Labour Conventions Case).103 This judgment, despite Laskin J.'s invitation in MacDonald v. Vapor Canada Ltd.,104 has never been questioned by the Supreme Court (see, for example, Schneider v. The Queen,105 Operation Dismantle v. The Queen106).107  It is true that this approach has a degree of complexity and requires, in particular, political agreement and collaboration between the federal and provincial governments; otherwise, Canada‘s international obligations in matters falling under provincial jurisdiction might not be fulfilled. This is, however, another example of the cooperative federalism the Supreme Court has often recognized as beneficial and necessary.  Canada is therefore not without an international voice and may choose to use this voice, regardless of the type of securities regulation scheme in place.  In any event, this in no way justifies Parliament acting on its own to resolve this alleged problem by enacting securities legislation to replace provincial legislation. 102 Expert Panel on Securities Regulation, Final Report and Recommendations, January 2009, evidence of the Attorney General of Canada, vol. II at 746 et seq. 103  A.C. 326. 104 Supra note 79 at 168–169. 105  2 S.C.R. 112 at 134–135. 106  1 S.C.R. 441 at 483–484 (Wilson J.). 107 On this subject, see: Peter W. Hogg, op. cit., note 48, chapter 11 (―Treaties‖). No.: 200-09-006746-090 PAGE: 49 v. The failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country  There is little to say about this final condition, except to note once again the paradox of the proposed Act in this respect. Its preamble makes much of the need for standard, unified securities regulation at the federal level, to support the national interest and the well-being of Canadians, but its transitional regime allows provinces, at least in theory, to permanently opt out of the proposed regime. We can therefore infer from this that the failure to include one or more provinces would not jeopardize the successful operation of the scheme in the other parts of the country.  The lawyers from the Attorney General of Canada argued that the government cannot be criticized for practicing cooperative federalism rather than coercive federalism. Needless to say, this argument raised the ire of the Attorneys General of Quebec and Alberta, who view this more as a way for the federal government to take over a regulatory sector which falls under provincial jurisdiction.  We have no opinion on this approach, except to note that the proposed Act, as it has been presented, would allow the provinces to opt out of the federal regime and thus would enable them to maintain their own legislation, which seems to contradict the fifth condition.  Would this condition be met if the federal government chose to propose coercive legislation instead? There is no need to answer this question, since the proposed Act fails to meet the third and fourth conditions. Indeed, the question is meaningless unless the other conditions are fulfilled. We observe, nevertheless, that the current reality of the securities regulation industry undermines the arguments in favour of the proposed Act, as the present scheme is obviously viable, legally and otherwise, and the failure to include a given province does not jeopardize the successful operation of the legislation in the other provinces. Moreover, the phenomenon of migration toward more lenient jurisdictions, which has been denounced by the Attorney General of Canada and the Canadian Bankers Association and which only a federal legislative scheme could prevent, does not appear crucial. Insofar as provincial legislation – on any subject matter – is variable, this phenomenon and its associated risks will inevitably exist. Accepting this argument as part of the constitutional analysis would amount to denying the federal nature of our political organization on the grounds that diversity is inconvenient.108 vi. Other considerations  These conditions, which are the indicia of general federal jurisdiction under the trade and commerce power, are neither exhaustive nor restrictive. Is there another 108 See in this regard: Canadian Western Bank v. Alberta, supra note 58, in particular paras. 21, 22 and 24. No.: 200-09-006746-090 PAGE: 50 element to support the conclusion that, although the proposed Act does not fulfill some of the conditions, it should nevertheless fall under federal jurisdiction, by reason of its subject matter? No other arguments have been presented in this vein. Consequently, since the third and fourth conditions of the test – certainly the most important – are not met, and the fifth is likely not either, the proposed Act cannot be validated under the general provision of subsection 91(2) of the Constitution Act, 1867. II. CONCLUSION  For the above reasons, we are of the view that the proposed Act does not validly fall under subsection 91(2) of the Constitution Act, 1867.  In Central Canada Potash, etc.109 the Supreme Court stated the following at page 76: Where governments in good faith, as in this case, invoke authority to realize desirable economic policies, they must know that they have no open-ended means of achieving their goals when there are constitutional limitations on the legislative power under which they purport to act. They are entitled to expect that the Courts, and especially this Court, will approach the task of appraisal of the constitutionality of social and economic programmes with sympathy and regard for the serious consequences of holding them ultra vires. Yet, if the appraisal results in a clash with the constitution, it is the latter which must govern. That was the situation here.  We cannot phrase it better. These words describe precisely the situation in the case at bar, as the proposed Act seeks to impugn securities regulation through means that come under provincial jurisdiction.110  We find, however, that there is an exception to this general finding.  Sections 158 to 168 of the proposed Act are valid under Parliament‘s jurisdiction under subsection 91(27) of the Constitution Act, 1867. Most of these provisions concern offences already covered by the Criminal Code and clearly fall under federal jurisdiction in this area.111 The same is true of sections 148 to 152, insofar as these provisions pertain to orders for the production of information in connection with criminal offences.  Sections 295 and 296 of the Budget Implementation Act, 2009 are also valid under the federal spending power, although events may dictate that federal policy in this respect should be revised. 109  1 S.C.R. 42. 110 Re: Anti-Inflation Act, supra note 10 at 453 (reasons of Beetz J.). 111 Although there may be certain other constitutional pitfalls with respect to sections 148 to 152, concerning orders for the production of information, which are provided for in those sections and which allow for the gathering of evidence. No.: 200-09-006746-090 PAGE: 51  The validity of section 297 of the Act, which enacts the Canadian Securities Regulation Regime Transition Office Act, is tied to that of the proposed Act.  Finally, it must be noted that another type of federal intervention may meet the constitutional requirements, particularly in terms of collaboration with the provinces, in accordance with the model of cooperative federalism upheld by the Supreme Court in Reference re Agricultural Products Marketing112 or in Fédération des producteurs de volailles du Québec v. Pelland.113 In the absence of any statute or even a draft statute, however, it is not for us to rule on the possible characteristics of such a regime, as it could apply to securities. * *  We respond as follows to the question asked by the Attorney General of Quebec: With the exception of the criminal provisions, which are valid under subsection 91(27) of the Constitution Act, 1867, the Proposed Canadian Securities Act, released by the Government of Canada on May 26, 2010, and section 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, are not within the legislative authority of the Parliament of Canada and do not comply with subsection 91(2) of the Constitution Act, 1867. ANDRÉ FORGET J.A. MARIE-FRANCE BICH J.A. JEAN BOUCHARD J.A. 112  2 S.C.R. 1198. 113  1 S.C.R. 292. No.: 200-09-006746-090 PAGE: 1 REASONS OF DALPHOND J.A. (DISSENTING) Introduction  On July 8, 2009, the Lieutenant-Governor in Council adopted Order in Council No. 869-2209 submitting three constitutional questions to the Court relating to the authority of the Parliament of Canada to enact a complete legislative scheme governing securities (Reference). On August 25, 2010, after the federal government published a proposal entitled Securities Act (―proposed Act‖), the Order in Council was amended by Order in Council No. 720-2010, to submit the following single question to the Court: [TRANSLATION] Are the provisions proposed in the Proposed Canadian Securities Act, published by the Government of Canada on May 26, 2010, the essential purpose of which is to protect investors and regulate the securities industry, and the provisions to that effect set out in sections 295, 296 and 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, ultra vires the Parliament of Canada under the Constitution Act, 1867?  For the reasons that follow, I am of the opinion that Parliament may enact the proposed Act by virtue of its power under subsection 91(2) of the Constitution Act, 1867 (Constitution Act) relating to the regulation of trade and commerce.1 Sections 295, 296 and 297 of the Budget Implementation Act, 2009 are valid under the federal government‘s spending power. Accordingly, my answer to the question submitted is ―no‖. Preliminary Comments 1 The new French version of the Constitution Act, 1867 translates the expression ―the regulation of trade and commerce‖ as follows: ―la réglementation du trafic et du commerce‖. For the purposes of these reasons, the expression ―échanges et commerce‖ is used, as it is the expression generally used in the decisions of the Supreme Court of Canada, rather than ―trafic et commerce‖. [TRANSLATOR‘S NOTE: These reasons were originally drafted in French. This note has no consequence on the English translation, which uses the express ―the regulation of trade and commerce‖ No.: 200-09-006746-090 PAGE: 2  An initial comment regarding the wording of the question is necessary. Strangely, it contains a characterization of the purpose of the proposed Act, even though the opinion sought calls for a determination of the pith and substance of the proposed Act and of the head of power to which it could be attached under the Constitution Act. This attempt to colour the exercise the Court has been invited to carry out is regrettable, given the role of the courts as apolitical institutions that act as neutral arbitrators in disputes between two or more individuals, institutions, entities or governments.  The Government of Alberta also seems to me to have given in to the temptation to try to influence the process. Its Order in Council, adopted in January 2010, reads in part as follows: WHEREAS a Canadian securities regulation regime and a Canadian securities regulator will usurp provincial jurisdiction over property and civil rights and upset the balance of federalism affecting financial-sector and consumer-protection regulation in Canada; THEREFORE the Lieutenant Governor in Council refers the following questions to the Court of Appeal of Alberta for hearing and consideration: 1 Does the Parliament of Canada have the legislative authority under the Constitution Act, 1867: (a) to pass sections 295, 296, and 297 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, (b) to pass legislation that is co-extensive in substance with the Alberta Securities Act and similar to the draft Securities Act appended to the Final Report and Recommendations of the Expert Panel on Securities Regulation, and (c) to pass legislation that is the same as or similar to the Proposed Canadian Securities Act – Sessional Paper No. 8525- 403-10? ... [Emphasis added.]  On the same day as it released the proposed Act, the federal government adopted Order in Council P.C. 2010-667, asking the Supreme Court of Canada, the court of last resort in constitutional cases, to give its opinion as to the validity of the proposed Act, putting a neutral question to that Court: Is the annexed Proposed Canadian Securities Act within the legislative authority of the Parliament of Canada? No.: 200-09-006746-090 PAGE: 3  Given the context, I consider a second comment to be necessary. How is it appropriate for this Court, and in fact for the Alberta Court of Appeal, to answer the question submitted to us, when in a few weeks the Supreme Court is going to answer the question in its own turn? Is this being done to allow the parties to rehearse before the only performance that will count, the one in April in Ottawa? To try to score points with public opinion? To try to influence the Supreme Court? That being said, I am prepared to assume that the governments of Quebec and Alberta are seeking a contribution from this Court and the Alberta Court2 to the legal debate that will take place in the Supreme Court. Otherwise, I would be of the opinion that this is a case in which an appellate court has the residual discretion to decline to answer a question (see, for example, Reference re Canada Assistance Plan (B.C.),  2 S.C.R. 525 at 545; Re: Objection by Quebec to a Resolution to amend the Constitution,  2 S.C.R. 793 at 806; Reference re Secession of Quebec,  2 S.C.R. 217 at paras. 26-30; Reference re Same-Sex Marriage,  3 S.C.R. 698, 2004 SCC 79 at para. 10).  The third comment is that the reference by the Government of Quebec is part of a strategy to deter Parliament from adopting a statute governing the securities market on the ground that this would be contrary to Quebec‘s interests and in particular to the role played by Montreal in the financial markets. The Government of Alberta shares that view in terms of the possible effects of a single statute on the economy of its province, particularly in terms of financing for new enterprises in the energy sector. However, it is not up to judges to decide whether a federal securities law is desirable for this country from an economic, cultural, political or other point of view (Reference re Firearms Act (Can.),  1 S.C.R. 783, 2000 SCC 31). Certainly, placing the capital market under the authority of a single agency, freely or by force, with its seat in Toronto, could weaken other economic or decision-making centres in Canada, such as Montreal or Calgary, but those considerations are irrelevant factors in the legal debate before us.  The fourth comment is on the effectiveness of the single model. There are some who argue that a single national agency would be in a better position to ensure the efficiency of the capital market and better protection for investors. Others assert the contrary with the same conviction. Both sides cite studies, experts‘ reports or commentaries from international organizations to prove the merits of their case. Like Professor Ian B. Lee, ―Balancing and its Alternatives: Jurisprudential Choice, Federal Securities Legislation and the Trade and Commerce Power‖ (2011), 50 Canadian Business Law Journal, 72, I am of the opinion that the arguments regarding effectiveness are irrelevant to the determination of the constitutional powers of Parliament, a legal issue. Moreover, one thing is certain: a court is not a forum that is qualified to resolve the issue of the economic efficiency of one regulatory model as 2 The Alberta Court of Appeal released its decision on March 8, 2011: Reference re Securities Act (Canada), 2011 ABCA 77. No.: 200-09-006746-090 PAGE: 4 compared to another. We must deal solely with the question of the authority of Parliament under the Constitution Act to enact the proposed Act, in whole or in part.3  The fifth comment is on the nature of the document that is the subject of the Reference. Contrary to what the Canadian Bankers Association asserts, there is no presumption of constitutionality here, since this is not a challenge to a statute enacted by Parliament or a legislature, after three readings and debate, possibly including the testimony of experts in the law before a parliamentary committee; this is simply a request for a legal opinion concerning a document drafted by the federal government. Our opinion and the final opinion of the Supreme Court actually deal with the authority of Parliament to enact a statute similar to the proposed Act, regardless of how the questions submitted are framed. That means that based on the comments and opinions received, the federal government may, if it still wishes, introduce a bill. If the bill reflects the opinions, the statute enacted may easily enjoy a presumption of validity under the Constitution Act and the Government of Quebec may act accordingly.  The sixth comment is that duplication of an existing, valid statute by a new statute does not result in a presumption that the first or the second is unconstitutional. It is open to Parliament and the legislatures to enact legislation that ultimately governs the same matter, by virtue of their respective powers in relation to various aspects of that matter, ―that is, depending on the various ‗aspects‘ of the ‗matter‘ in question‖ (Canadian Western Bank v. Alberta,  2 S.C.R. 3, 2007 SCC 22 at para. 30). That principle has previously been recognized by the Supreme Court, in particular in Multiple Access Ltd. v. McCutcheon,  2 S.C.R. 161 at 181, and much earlier by the Privy Council in Hodge v. The Queen, (1883) 9 A.C. 117: ―subjects which in one aspect and for one purpose fall within sect. 92, may in another aspect and for another purpose fall within sect. 91‖. In that case we refer to the dual aspect of a subject or matter: Bell Canada v. Quebec (CSST),  1 S.C.R. 749. The result may be very similar sections in both statutes, one federal and the other provincial, a phenomenon described by the Supreme Court as ―the ultimate in harmony‖ in Multiple Access at 190. Otherwise, the federal statute is paramount (Multiple Access atp. 191). In no case does such duplication affect the validity of the statutes in issue, contrary to what counsel for Alberta and Quebec seem to be arguing. On the contrary, the validity of the proposed Act must be determined without regard to the existing provincial statutes (General Motors of Canada Ltd. v. City National Leasing,  1 S.C.R. 641, p. 682; Multiple Access, p. 175).  The seventh comment is that confusion must be avoided between (i) the ―pith and substance‖ (―caractère véritable‖ or ―caractéristique dominante‖) of a statute, (ii) the purposes (―objet‖) of a statute, (iii) the effects, anticipated or real, of the statute, and (iv) the methods used to achieve the purposes of the statute. Two statutes may have a different pith and substance while having similar effects and using identical methods. 3 For the information of the Government of Quebec, the Court may give an opinion on the legality of a statute that would incorporate the proposed Act only in part. No.: 200-09-006746-090 PAGE: 5 Accordingly, provisions that prohibit driving with a blood alcohol level above a certain point may be enacted by Parliament if their pith and substance is criminal law, that is, prohibiting a public evil (―mal social‖), while similar provisions may be enacted by the legislatures if their pith and substance is the regulation of highway traffic in the province or conditions associated with the issuance of licences. In both cases, the objective is to reduce the damage, injuries and deaths associated with impaired driving, using the same methods: intercepting drivers and determining their blood alcohol level, and imposing sanctions. Another example is the regulation of tobacco, where both Parliament and the National Assembly of Quebec have legislated, the former in 1997 with the Tobacco Act, S.C. 1997, c. 13, and the latter in 1998 with the Tobacco Act, R.S.Q., c. T-0.01.4 Nonetheless, both the federal and provincial statutes are constitutionally valid (Provincial Secretary of Prince Edward Island v. Egan,  S.C.R. 396) since their pith and substance is different.  The eighth and final comment concerns the danger of using expressions like ―capital markets‖ (―marches des capitaux‖), ―securities market‖ (―marché des valeurs mobilières‖), ―trading/dealing in securities‖ (―commerce des valeurs mobilières‖) and ―securities industry‖ (―industrie/secteur des valeurs mobilières‖) as synonyms. Some people use them interchangeably, and then read more into decisions of the Privy Council, formerly the highest constitutional court in the land, or the Supreme Court of Canada, than they said. For the purposes of these reasons, I will mainly use the expressions ―capital market‖ (―marché des capitaux‖) and ―trading/dealing in securities‖ (―commerce des valeurs mobilières‖), keeping in mind that they correspond to different fact situations.  Trading in securities involves the buying and selling of securities,5 activities that comprise the core activities of brokers and dealers (entreprises en valeurs mobilières). The securities industry is the economic sector consisting of brokerage houses or other institutions that purchase/acquire all new issues and resell them to investors or that act as intermediaries in transactions on the secondary market. The Investment Industry Association of Canada (IIAC), a national association with offices in Toronto, Montreal and Vancouver, is composed of 183 of these firms, which carry out 99 percent of transactions on the primary and secondary markets in Canada. This is an industry in which most oversight of individual brokers is provided by a self-regulatory body supervised by the securities commissions, the Investment Industry Regulatory 4 The federal statute, enacted by virtue of Parliament‘s power in relation to health, focuses on the manufacture of the product, labelling standards and marketing of the product. The provincial statute, enacted by virtue of the power in relation to local contracts, focuses more on the sale, display and marketing of the product. The purpose of both statutes is to protect the public and attempt to reduce smoking, using methods that are the same, supplement each other or overlap. The pith and substance of the federal statute is the regulation of a product that is hazardous to health; the ptih and substance of the provincial statute is the regulation of the sale of a product. 5 At para. 26 of the factum filed by the Attorney General of British Columbia in the Supreme Court of Canada, he defines ―trading in securities‖ as ―selling or performing acts in furtherance of a sale of securities‖. No.: 200-09-006746-090 PAGE: 6 Organization of Canada / Organisme canadien de réglementation du commerce des valeurs mobilières.  The IIAC website6 offers the following definition of the Canadian securities industry: Three categories of firms make up the Canadian securities industry: integrated firms, institutional firms and retail firms. Integrated firms offer the broadest range of products and services, covering all aspects of the industry, including full participation in both the institutional and the retail markets. There are 11 integrated firms providing retail and institutional business to clients. In 2009, 72 foreign and domestic institutional firms served institutional clients almost exclusively. Foreign firms account for about 30 per cent of total institutional firms and include affiliates of many of the major U.S. and European securities dealers. 117 retail firms account for the remainder of the industry. Retail firms include full service firms and discount brokers. Full service retail firms offer a wide variety of products and services for the retail investor. Discount brokers execute trades over the telephone and over the internet for clients at reduced rates but do not provide advice. Discount brokers are more popular with those investors who are willing to research individual companies themselves in exchange for lower commission rates.  The securities industry cannot be considered as including securities issuers, such as the banks, mining companies, communications enterprises, oil companies, pharmaceutical companies, and so on, which are all separate industries that it could not seriously be argued are doing business in the securities industry or are part of that industry when they issue securities that are then in public. Similarly, when those enterprises borrow from the banks, it could not seriously be argued that they are doing business in the banking industry or are part of that industry. In both cases, those enterprises are merely using financing methods that are offered by two different pillars of the economy.  The capital market (marché des capitaux) is defined as follows in the Oxford Dictionary of Finance and Banking, 3rd ed. (Oxford University Press, 2005): A market in which long-term capital is raised by industry and commerce, the government, and local authorities. The money comes from private investors, 6 http://www.iiac.ca/welcome-to-iiac/about-us/who-we-are, accessed on March 25, 2011. There is no French version to date. No.: 200-09-006746-090 PAGE: 7 insurance companies, pension funds, and banks and is usually arranged by issuing houses and merchant banks. Stock exchanges are also part of the capital market in that they provide a market for the shares and loan stocks that represent the capital once it has been raised. It corresponds to an economic fact situation that is expressed in a range of activities: issuance of new shares by an issuer, underwriting agreements and bought deals by intermediaries, marketing of securities (road shows, advertising, purchase recommendations, etc.), assessment of the value of the securities by third parties (rating), exchanges of securities on the secondary market via a stock exchange, audits of issuers‘ financial statements, regulation of intermediaries, credit facility made available to the investor by the broker, investigations, rules governing the operation of clearing houses, and so on. The Attorney General of Canada and counsel for the Canadian Bankers Association, and a number of experts, consider the expressions ―securities market (―marché des valeurs mobilières‖) and ―capital market (―marché des capitaux‖) to be synonyms; this does not concern me, and seems to reflect the usage in the industry.7 Regulation of activities relating to securities is historically within the authority of two levels of government  The principle of exhaustiveness, an essential characteristic of the federal distribution of powers, ensures that the whole of legislative power, whether exercised or merely potential, is distributed as between Parliament and the legislatures: Attorney- General for Ontario v. Attorney-General for Canada,  A.C. 571 (P.C.) at 581; Attorney-General for Canada v. Attorney-General for Ontario,  A.C. 326 (P.C.); Reference re Same-Sex Marriage at para. 34. That means there is no topic that cannot be legislated upon, though the particulars of such legislation may be limited by, for instance, the Charter. The question of jurisdiction to enact any law is therefore limited to determining to which head of power under the Constitution Act the law relates. Regulation of the various aspects of the capital market must therefore be vested in either Parliament or the legislatures, or in both, as is the case for the environment (Friends of the Oldman River Society v. Canada (Minister of Transport),  1 S.C.R. 3).  With respect to ―securities‖ (valeurs mobilières), it must be acknowledged at the outset that this is not a subject matter enumerated in sections 91 and 92 of the Constitution Act, unlike currency, the issue of paper money and bills of exchange. 8 7 As well, it seems that both the singular and the plural are used to refer to these markets. 8 In the United States, securities regulation is not mentioned in the 1787 Constitution or in subsequent amendments. The United States Congress relied on its power in relation to interstate trade and commerce when it enacted the Securities Act of 1933 and the Securities And Exchange Act of 1934 after the financial crisis of 1929 and the Great Depression that followed. In Australia, the Constitution, An Act to Constitute the Commonwealth of Australia, 63 & 64 Vict., c. 12 (U.K.), adopted on July 9, 1900, is also silent on this point. Because the High Court of Australia had concluded that the federal No.: 200-09-006746-090 PAGE: 8 However, securities (in the form of bonds, debentures and stocks) existed in 1867, the era when the London Stock Exchange, founded in 1801, was the exchange for the British Empire. The stock market had already experienced major scandals, one of which, involving the South Sea Company, resulted in intervention by the British Parliament in 1720 when it enacted the Bubble Act (An Act for Better Securing Certain Powers and Priviledges Intended to be Granted by His Majesty by Two Charters for Assurance of Ships and Merchandise at Sea, 6 Geo. I, c. 18), which was repealed in 1825.  The Fathers of Confederation did not really devote time to this subject, and devoted even less to the question of the level to which it should be assigned. 9 As a result, it should come as no surprise that their proposals to the Imperial government did not address it. That is undoubtedly explained by the fact that the capital market was in its infancy in Canada at that time. As R.C. Michie wrote in ―The Canadian Securities Market 1850-1914‖ (1988), 62 Business History Review 35, at p. 49: The ready availability of funds from Britain inhibited the growth of a comprehensive securities market in Canada. Both government and the railways could raise capital more easily and cheaply in London than in either Toronto or Montreal and, as the British investors‘ knowledge of Canada continued to improve, so could increasingly smaller concerns.  Confirmation that the capital market was only an emerging one at the time in Canada is found in the fact that it was not until 1848 that the first Board of Brokers was established in Montreal, comprising brokers dealing not only in securities but also in goods, and it was 1874 when a non-profit organization charter was granted to the Montreal Exchange by special Act: An Act to incorporate the Montreal Stock Exchange, S.Q. 1874, c. 54. The same phenomenon occurred in Toronto, where a group of businessmen formed the Association of Brokers in 1852 and the Toronto Stock Exchange in 1861, which was incorporated by statute in 1878 (An Act to Incorporate the Toronto Stock Exchange, S.O. 1878, c. 65). The capital markets for enterprises and governments were actually located elsewhere. For example, the shares of the first major Canadian enterprises, such as the Royal Bank of Canada and Canadian Pacific and the Grand Trunk Railway, were traded on the London and New York exchanges. Parliament could not rely on its power over existing corporations as authority to enact legislation authorizing the creation of new companies and the issuance by them of securities, the Australian states delegated that power to it in the early years of this century. The Australian Securities and Investments Commission Act 2001 (Cth.) was enacted in 2001; it provides for the creation of the Australian Securities and Investments Commission. 9 The parliamentary debates of the Parliament of the Province of Canada for 1865 concerning Confederation of the provinces of British North America refer several times to the London Stock Exchange and the fact that bonds issued by the Province of Canada (borrowing instruments referred to as ―securities‖ in the debates) had dropped significantly on the London market since rumours began of a new war with the United States. No.: 200-09-006746-090 PAGE: 9  J. Peter Williamson, Securities Regulation in Canada, University of Toronto Press, 1960, p. 3, writes that oversight of the securities market began in England in 1285, with the licensing of brokers. The British model for a long time thereafter involved adding provisions to corporate law requiring that certain information be provided to investors, through a prospectus, and then to shareholders (annual meeting, financial reports, annual prospectus, etc.) (Williamson, pp. 4-8).  Oversight of the Canadian capital market was influenced not only by the Imperial model, involving adding provisions to corporate law to ensure a degree of transparency, but also by the American model, which had, since the beginning of the 20th century, involved specific statutes requiring authorizations before issuing or selling securities (Williamson at 9-28; David Johnston and Kathleen Doyle Rockwell, Canadian Securities Regulation, 4th ed. (LexisNexis Butterworths, 2006) at 19-30).  I will begin with oversight at the federal level of various aspects of the capital markets, and then describe provincial oversight, with particular attention to the Quebec experience.  Parliament has acted by enacting criminal provisions10 by virtue of its power under subsection 91(27) of the Constitution Act, to prohibit certain practices relating to securities: - false prospectus (section 400 Cr. C.), enacted in 1869, part of the Act respecting Larceny and other similar offences, S.C. 1869-1870, c. 21, section 85 (Smith v. The Queen,  S.C.R. 776); - gaming in stocks (l'agiotage sur les actions) (section 383 Cr. C.), formerly known as ―bucket-shop‖, enacted in 1888 by the Act concerning Gaming in Stocks and Merchandise, S.C. 1888, c. 42. The purpose of that Act was to eradicate gambling and betting on the rise and fall of stocks and merchandise by contracts or transactions without delivery, causing values to fluctuate on foreign markets. It was thought that gaming houses were causing significant harm to Canadians, by ruining them; - fraud by affecting the public market (section 380(2) Cr. C.), forgery (ss. 366 and 367 Cr. C.) and use of a forged document (section 368 Cr. C.), enacted in 1892; - broker reducing stock by selling for his own account (section 384 Cr. C.), enacted in 1930 at the request of the provincial attorneys general11 to prevent brokers from selling the shares they hold in order to reduce the number in the 10 A Criminal Code was enacted in 1892. 11 Except for Quebec, which was not represented at the interprovincial conference. No.: 200-09-006746-090 PAGE: 10 ordinary course of business below the number of shares they should carry for all clients;12 - fraudulent manipulation of stock exchange transactions (section 382 Cr. C.), enacted at the request of the Ontario government in 1948 to prevent the manipulation13 of stock exchange transactions and criminalize sham sales; - prohibited insider trading (section 382.1 Cr. C.), enacted in 2004 by the Act to amend the Criminal Code (Capital Markets Fraud and Evidence-Gathering).14 Although that offence already existed in provincial securities legislation and the Canada Business Corporations Act, R.S. 1985, c. C-44 (CBCA), Parliament wanted to create a criminal offence for cases that deserved more severe punishment.  Inspired by legislative developments in London, Parliament regulated other aspects of the securities market, including the sale of shares on the primary market, by virtue of its power to enact corporate law (introductory paragraph of section 91 of the Constitution Act15). For example, in 1869, Parliament enacted two statutes, the first concerning the content of special Acts creating companies16 (The Canada Joint Stock Companies Clauses Act, (1869) 32-33 Vict., c. 12) and the second governing the incorporation and operation of companies created by letters patent (An Act respecting Joint Stock Companies incorporated by Letters Patent, (1869) 32-33 Vict., c. 13), which replaced pre-Confederation corporate law. These statutes contain provisions regarding authorized share capital, payment for shares (calls), the shareholders register and access to that register by all shareholders, share transfers, election of directors by shareholders and the qualifications for those positions, notices of meetings (including a notice in the local newspapers), directors‘ liability for unpaid wages, and the prohibition on loans to shareholders.  In 1877, the second statute was replaced by a new one that contained twice as many sections: The Canada Joint Stock Companies' Act, 1877, (1877) 40-41 Vict., c. 43. Among the major amendments included, I note the following, the purpose of which was plainly to ensure that the company was serious and to protect investors: 12 Canada, Debates of the House of Commons of Canada, 1930, Vol. III, at p. 2698, by the Hon. Ernest Lapointe. 13 The speech by Mr. Ilsley refers to manipulation (Debates of the House of Commons of Canada, 1948, Vol. V, at p. 5335). 14 In his speech in the House concerning the bill, the parliamentary secretary to the Minister of Justice and Attorney General of Canada, Paul Harold Macklin, stated that investor confidence is essential to the existence of Canadian financial markets and the Canadian economy. 15 The provinces may incorporate companies with provincial objects (section 92(11)) and Parliament may incorporate companies for objects other than provincial objects (preamble to section 91; Citizens Insurance Company of Canada v. Parsons, (1881) 7 A.C. 96 at 117). 16 ―Sociétés par actions‖, in the new French terminology. No.: 200-09-006746-090 PAGE: 11 - new pre-incorporation requirements: notice in the Canada Gazette, money on deposit in the bank and verification of the truth of the facts alleged by an official (ss. 4-6); - requirement that shareholders‘ consent be obtained to amend the objects of the company (section 14), the number of directors (section 18), subdivision of shares, and amendment of the authorized capital (section 22); - payment for shares in cash (section 83); - content of prospectus or invitation to subscribe for shares (section 84); - annual report to shareholders by directors (section 87).  The current federal corporations statute, the Canada Business Corporations Act, R.S.C. (1985), c. C-44 (CBCA), also contains numerous provisions that are applicable to public corporations, dealing with insider trading, solicitation of proxies, presentation of financial information, going private and squeeze-out transactions, forced redemption of dissidents, takeovers and other matters. They are plainly designed to protect shareholders/investors.  In Multiple Access, above, the Supreme Court recognized the constitutional validity of the insider trading provisions in the CBCA‘s forebear, when the contrary had been argued, the assertion being that they constituted regulation of securities, a matter that fell within the exclusive jurisdiction of Ontario over securities. The validity of those provisions was recognized as flowing from Parliament‘s power under the introductory paragraph of section 91 of the Constitution Act to incorporate extraprovincial companies and regulate their operation, even though this may affect ―trading in securities‖ (―le commerce des valeurs mobilères‖ in the French version of the reasons). In other words, the pith and substance of those provisions falls under federal corporate law (Maurice Martel and Paul Martel, La compagnie au Québec: les aspects juridiques, 2010, Montreal, Wilson & Lafleur at 3-8 and 3-9). Dickson J., writing for the majority, said, at p. 176: With respect, I do not agree. Sections Avec égards, je ne partage pas cet avis. 100.4 and 100.5 put teeth into s. 100 of Les articles 100.4 et 100.5 renforcent the Act. Viewed in isolation it can no l‘art. 100 de la Loi. On peut certes faire doubt be argued that their matter is the valoir que, pris isolément, ils visent le trading in securities. Viewed in context, commerce des valeurs mobilières. however, they are, in my opinion, Toutefois, si on les situe dans leur company law. They fit properly and contexte, ils constituent, à mon avis, du comfortably into Part I of the Canada droit corporatif. Ils s‘insèrent bien dans la Corporations Act. The provisions deal partie I de la Loi sur les corporations with obligations attached to the canadiennes. Ces dispositions traitent ownership of shares in a federal des obligations liées à la propriété des No.: 200-09-006746-090 PAGE: 12 company, which extend to shareholders, actions des compagnies fédérales, qui officers and employees of such s‘appliquent aux actionnaires, aux companies, a subject matter that is not administrateurs et aux employés de ces within the exclusive jurisdiction of compagnies, un sujet qui ne relève pas provincial legislatures. The provisions de la compétence exclusive des are also directed to the relationship provinces. Ces dispositions visent between management and shareholders également les rapports entre la direction of federal companies. Their enactment et les actionnaires des compagnies by Parliament is in the discharge of its fédérales. Leur adoption par le company law power. [Emphasis added.] Parlement constitue un exercice de son pouvoir en matière de droit corporatif. He added, at 181: As Professor Ziegel has stated Comme l‘a dit le professeur Ziegel, ―[s]ecurities legislation clearly has a [TRADUCTION] ―[i]l est évident que les double character (―Constitutional Aspects lois sur les valeurs mobilières ont un of Canadian Companies‖ in Canadian caractère double‖ (―Constitutional Company Law (1967), chapter 5, at Aspects of Canadian Companies‖ dans p. 167) and, ―there is no simple Canadian Company Law (1967), dichotomy between legislation of a chapitre 5, at p. 167) et [TRADUCTION] company law character and legislation ―il n‘y a pas de dichotomie simple entre affecting property and civil rights in the une loi qui participe de la nature du droit province. Viewed in its proper social and corporatif et une loi concernant la economic context the legislation may well propriété et les droits civils dans la have a double character‖ (at pp. 192-93). province. Considérée dans son contexte social et économique approprié, la loi peut certes posséder un caractère double‖ (aux pp. 192 et 193).  Commenting on that decision, Beetz J., writing for a unanimous court in Bell Canada, above, at pages 765 and 766, said: Similarly, rules regarding "insider trading" De même, des dispositions concernant les may be regarded as belonging to ―opérations des dirigeants‖ (―insider corporate law within exclusive federal trading‖) peuvent être considérées comme jurisdiction in the case of federally- du droit corporatif de compétence fédérale incorporated companies and as regulation exclusive lorsqu'il s'agit de compagnies à of trade in securities within exclusive charte fédérale, et comme une provincial jurisdiction, applicable to réglementation du commerce des valeurs federally-incorporated companies, mobilières, de compétence provinciale No.: 200-09-006746-090 PAGE: 13 provided the latter are not singled out and exclusive, applicable aux compagnies à their essential powers are not impaired: charte fédérale, pourvu que celles-ci ne Multiple Access Ltd. v. McCutcheon, soient pas traitées de façon discriminatoire  2 S.C.R. 161. [emphasis added] et que leurs pouvoirs essentiels soient respectés: Multiple Access Ltd. c. McCutcheon,  2 S.C.R. 161.  In 2000, in Global Securities Corp. v. British Columbia (Securities Commission),  1 S.C.R. 494, 2000 SCC 21, writing for the unanimous Court, Iacobucci J. cited Multiple Access as confirming the validity of ―aspects of federal securities regulation‖ under the ―‘double aspect‘ theory‖ (para. 46).  The courts have also recognized provisions concerning the forced redemption of dissident shareholders (Rathie v. Montreal Trust Co (1952), 6 W.W.R. (N.S.) 652, cited with approval by the Supreme Court in Multiple Access), directors‘ liability for payment of dividends (Reference re constitutional validity of s. 110 of the Dominion Companies Act,  S.C.R. 653) and redemption of minority shareholders after a takeover (Esso Standard (Inter-America) Inc. v. J.W. Entreprises Inc.,  S.C.R. 144) as being federal company legislation that is valid as a result of the pith and substance of the provisions.  Parliament also regulates securities in relation to enterprises that fall within its jurisdiction. For example, the Bank Act, S.C. 1991, c. C-46, contains 506 sections, including the issue, holding and exchange of shares, limits on voting rights, proxy solicitation, issue of subordinate indebtedness, insider trading, prospectuses, information to be disclosed, mergers, share redemption, takeovers, and so on. It sets out a complete code governing bank securities. An obvious indication that these provisions deal with the same subjects as provincial securities legislation is that the Superintendent of Financial Institutions is authorized to grant exemptions where compliance with provincial laws satisfies him that the objectives and restrictions in the Bank Act have been met (section 274 of the Bank Act). In addition, more than 20 percent of the shares of a bank may not be held by a single person or by a group. There are also restrictions on the holding of shares of telecommunications undertakings (Telecommunications Act, S.C. 1993, c. 38, s. 76(1)).  In other words, there has long been federal regulation of securities in relation to companies regulated by Parliament, and this has been held to be valid by the courts. Parliament has recently added the Payment Clearing and Settlement Act, S.C. 1996, c. 6, s. 19 of which deals with payment for securities.  Lastly, takeovers of enterprises, whether federal or not, may be blocked in certain cases under the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.)) or under the Competition Act, R.S.C. 1985, c. C-34. It is not contested that Parliament could enact the former by virtue of its jurisdiction over the regulation of international trade (section 91(2)); the validity of the latter was challenged, and the Supreme Court concluded, in No.: 200-09-006746-090 PAGE: 14 General Motors, above, that it is a valid exercise of the same power to regulate general trade and commerce. The purchase of the TSX Group, a company that owns the three Canadian stock exchanges, by the London Stock Exchange is in fact being reviewed under the Investment Canada Act at the time of writing of these reasons.  I will now move on to the regulation of securities by the provinces.  Over 100 years ago, inspired by the British model, Quebec required that brokers hold a licence to operate (S.Q. 1900, c. 12, as amended by par S.Q. 1906, c. 9, s. 50). For the rest, such as stock exchanges, everything came down to self-regulation.  It was not until May 1924 that companies that wanted to issue shares, bonds and other securities in Quebec, other than those listed on an exchange incorporated in Canada or on the stock exchange in Paris, London or New York, were first required to file a prospectus, audited financial statements and a copy of the charter and bylaws with the provincial Secretary, failing which a purchaser may seek cancelation, the company may not bring action for calls, and a penalty may be imposed (An Act respecting the issue and sale of shares, bonds and other securities, R.S.Q. 1925, c. 228).  In 1930, drawing on the legislation enacted by Ontario two years earlier, The Security Frauds Prevention Act, S.O. 1928, c. 34 (replaced in 1930, S.O. 1930, c. 39), the Legislature of Quebec enacted the An Act for the prevention of fraud in connection with securities, S.Q. 1930, c. 88, which became chapter 228A of the Revised Statutes of 1925. That Act contained a total of 25 sections. It centred on the registration of brokers and vendors of securities in a public register, the provision of security by them, audits of their books by accountants approved by a stock exchange, and the obligation to provide a client with written confirmation of any securities transaction in their name (number and value of shares, name of purchasers and vendors, time of the transaction). It included an issuer of securities in the definition of broker. It prohibited misrepresentations, which it defined as fraudulent acts, and the sale of securities of companies in which brokers had an interest. It also gave the Attorney General or his representative investigative powers. In 1933, brokers were prohibited from doing trading in securities issued by an issuer that had not filed a prospectus with the provincial registrar. In 1935, the 1930 Act became the Securities Act. In 1938, it became mandatory for brokers to provide purchasers of newly issued securities (primary market) with a copy of the prospectus containing the information determined by the Lieutenant Governor in Council.  In Alberta, 1930 was also when The Alberta Security Frauds Prevention Act, S.A. 1930, c. 8, was enacted; in 1916, it had enacted The Sale of Shares Act, S.A. 1916, c. 8, a law modeled on American legislation.  Commissions were created in 1932 in Ontario (Security Frauds Prevention Board, the forebear of the present Ontario Securities Commission (OSC)) and in 1955 in Alberta and Quebec (Securities Act, S.Q. 1954-55, c. 11, s. 2, creating the Quebec No.: 200-09-006746-090 PAGE: 15 Securities Commission (QSC), now incorporated into the Autorité des marchés financiers (AMF)).  Shortly after the provincial securities statutes were enacted, they were challenged and the challenges were rejected by the Privy Council. Their Lordships concluded that the pith and substance of those statutes was the regulation of dealing in securities in the province, in order to protect investors in the province, and that this fell easily within the jurisdiction of the legislatures over property and civil rights in the province and matters of a local or private nature in the province (sections 92(13) and (16)) of the Constitution Act). In Lymburn v. Mayland,  A.C. 318, their Lordships stated, at 324: There is no reason to doubt that the [TRANSLATION17] Il n‘y a pas de raison de main object sought to be secured in this douter du fait que cette partie de la loi a part of the Act is to secure that persons pour objet principal d‘assurer que ceux who carry on the business of dealing in qui se livrent au négoce des valeurs securities shall be honest and of good mobilières sont honnêtes et de bonne repute, and in this way to protect the réputation et de protéger ainsi le public public from being defrauded. Incidentally contre la fraude. Soit dit en passant, le the net has been drawn so wide as to filet a été suffisamment déployé pour cover the issue of shares by a public recouvrir jusqu‘à l‘émission d‘actions par company, with the result that a company une compagnie publique, de sorte cannot issue its shares to the public qu‘une compagnie ne peut offrir une unless for that purpose it employs a émission d‘actions au public sans registered broker or salesman, or unless employer à cette fin un courtier ou un the company itself is registered. It is vendeur enregistré ou sans l‘être elle- said that these provisions so far as they même. On affirme que ces dispositions, affect Dominion companies are ultra dans la mesure où elles s‘appliquent aux vires according to the principles adopted compagnies fédérales, sont ultra vires by this Board in John Deere Plow Co. v. en raison des principes énoncés par la Wharton,  A.C. 330; Great West présente chambre dans les arrêts John Saddlery Co. v. The King,  2 A.C. Deere Plow Co. c. Wharton,  A.C. 91; and Att.-Gen. for Manitoba v. Att.- 330; Great West Saddlery Co c. Le Roi, Gen. for Canada,  A.C. 260. In  2. A.C. 91, et Le Procureur those cases there was a general général du Manitoba c. Le Procureur prohibition to companies either to trade général du Canada,  A.C. 260. at all or to issue their capital unless the Ces affaires portaient sur l‘interdiction company was registered. The legislation générale faite à des compagnies soit de was held ultra vires because the vendre quoi que ce soit soit d‘émettre legislative powers of the Province are leur capital sans être d‘abord restricted so that "the status and powers enregistrées. La Législation a été 17 The French version is taken from the book by Professor Herbert Marx (as he then was), Les grands arrêts de la jurisprudence constitutionnelle au Canada (Les Presses de l'Université de Montreal, 1974) at 391-392. No.: 200-09-006746-090 PAGE: 16 of a Dominion company as such cannot déclarée ultra vires, parce que les be destroyed" (John Deere Plow Co. pouvoirs législatifs de la province sont case,  A.C. 330) and legislation limités de telle façon que ―le statut des will be invalid if a Dominion company is pouvoirs d‘une compagnie fédérale ne "sterilized in all its functions and peuvent être ainsi anéantis‖ (voir l‘arrêt activities" or "its status and essential John Deere Plow Co.) et une loi sera capacities are impaired in a substantial invalide si une compagnie fédérale est degree" (Great West Saddlery Co. case, ―paralysée dans ses fonctions et dans  2 A.C. 91). It appears to their son activité‖ ou si ―son statut et ses Lordships impossible to bring this pouvoirs essentiels sont radicalement legislation within such a principle. A amoindris‖ (voir l‘arrêt Great West Dominion company constituted with Saddlery Co.). Il semble impossible à powers to carry on a particular business leurs Seigneuries d‘appliquer un tel is subject to the competent legislation of principe à la présente législation. Une the Province as to that business and compagnie fédérale, constituée dans le may find its special activities completely but d‘exploiter une entreprises paralysed, as by legislation against drink particulière, est assujettie à la loi valide traffic or by the laws as to holding land. de la province concernant ce type If it is formed to trade in securities there d‘entreprise et elle peut trouver son appears no reason why it should not be activité spécifique complètement subject to the competent laws of the paralysée, par exemple par la législation Province as to the business of all réprimant le trafic des alcools ou par des persons who trade in securities. As to lois relatives à la propriété foncière. Si the issue of capital there is no complete elle est constituée pour pratiquer le prohibition, as in the Manitoba case, négoce des valeurs mobilières, il ne  A.C. 260 in 1929; and no reason semble y avoir aucune raison pour to suppose that any honest company qu‘elle ne soit pas assujettie aux lois would have any difficulty in finding valides de la province concernant registered persons in the Province l‘entreprise de tous ceux qui se livrent à through whom it could lawfully issue its ce négoce. Quant à l‘émission du capital. There is no material upon which capital-actions, il n‘y a pas d‘interdiction their Lordships could find that the complète comme dans l‘affaire Manitoba functions and activities of a company de 1929, et il n‘y a pas lieu de supposer were sterilized or its status and essential qu‘une compagnie de bonne foi aurait de capacities impaired in a substantial la peine à trouver dans la province des degree. [Emphasis added.] personnes enregistrées par l‘intermédiaire desquelles elle pourrait validement émettre son capital-actions. Il n‘y a aucun élément de preuve qui permette à leurs Seigneuries de conclure que les fonctions et l‘activité d‘une compagnie ont été paralysées ou que son statut et ses pouvoirs essentiels No.: 200-09-006746-090 PAGE: 17 ont été radicalement amoindris. In short, the purpose of these laws, which involve registration of persons who carry on the business of dealing in securities and verification of their qualifications, is to ensure that those persons are honest and reliable, plainly in order to protect investors. That approach, which involves regulating the trading in securities industry in the province, was adopted by the Supreme Court, which in 1949 became the court of last resort for all cases, in Smith v. The Queen,  S.C.R. 776 at 780; Gregory & Co. Inc. v. Quebec Securities Commission et al.,  S.C.R. 584 at 588; Brosseau v. Alberta Securities Commission,  1 S.C.R. 301 at 314; Multiple Access, supra at 183-184; and Global Securities, supra at para. 33.  With time, the provincial laws have come to regulate not only the securities industry, but also stock exchanges and other persons involved in both the primary and secondary markets. In addition, the provincial legislation covers the operation of enterprises whose securities are held by the public: ongoing information, proxy solicitation, prohibition on insider trading, audit committee, takeovers, share exchanges, privatization of the company, and so on. They therefore affect the fundamental aspects of the corporate life of companies that issue securities.  These extensions of provincial oversight in reality affect the internal operation of public companies and are, in truth, corporate law. Jacob Ziegel, Studies in Canadian Company Law (1967), wrote, in vol. 1 at 170: Prima facie the regulation of proxies and [TRANSLATION] À première vue, la insider trading belong exclusively to the réglementation des procurations et des domain of company law because they opérations des dirigeants relève affect the relationship between the exclusivement du domaine du droit directors of a company and its corporatif parce qu‘elle concerne le rapport shareholders and the solicitation of entre les administrateurs d‘une compagnie voting powers at meetings of the et ses actionnaires et la sollicitation des company. droits de vote aux assemblées de la compagnie.  In the case of companies incorporated under a federal statute, the provincial legislation encroaches on the exclusive jurisdiction of Parliament over federal corporate law, but nonetheless valid in so far as that encroachment is incidental to the valid exercise of a provincial power under the double aspect theory, provided that it does not neutralize or contradict a federal provision; otherwise, the federal provision will be paramount (Multiple Access, above). No.: 200-09-006746-090 PAGE: 18  Today, some provincial bodies are even involved in oversight of participants located outside their province (e.g., the TSVX (venture capital) exchange is supervised jointly by the British Columbia and Alberta commissions). That extraprovincial aspect of the activities of the provincial commissions is also valid as incidental to the jurisdiction in relation to securities in the province, even if it is plainly an encroachment on federal jurisdiction in relation to interprovincial commerce (see, by analogy, Multiple Access and Global Securities, supra).  With globalization of markets, the provincial commissions have been given the power to collaborate in investigations outside their province. In Global Securities, above, the Supreme Court saw this as measures that are included in achieving the primary objective, that is, to protect local investors by overseeing the honesty of a broker or issuer doing business in the province, even if they incidentally involve an extraprovincial aspect.  Quebec‘s present Securities Act contains no fewer than 350 sections, an undeniable indication that it has branched out from the 1930 Act, which had 25, and the 1955 Act, which created the QSC and revised the entire securities regulatory scheme, and which had 97 sections. The present Alberta statute, the source from which much of the proposed Act is drawn, contains about 250 sections.  The modern provincial statutes are no longer limited to protecting investors when they purchase securities on the primary or secondary market. They are also intended to promote access to capital for certain categories of enterprises. For example, to encourage local industries for the benefit of the economy of the province concerned, exemptions from filing prospectuses have been granted, and other formalities made more flexible. The Attorney General of Quebec wrote, at para. 40 of his factum: [TRANSLATION] These interprovincial coordination efforts have ensured a high degree of harmonization of the regulatory schemes between the various provinces ..., and at the same time have respected the need to preserve regulatory measures of an original nature that meet the specific needs of each province …, such as the predominance of the mining industry in British Columbia and the oil and gas industry in Alberta and the existence of the derivatives sector in Quebec. In his factum, the Attorney General of Alberta made similar comments and was concerned about the possible loss of this ability if there were to be a single agency and a single law for all of Canada. At para. 65, he quotes the following comments by the Alberta Minister of Finance: Yet it is better than a federal system because provincial securities regulators better understand the unique regional needs of their market - such as those of junior oil and gas producers in Alberta. A federal regulator headquartered in No.: 200-09-006746-090 PAGE: 19 Toronto could make it harder for these and other Alberta businesses to raise funds for growth and development.  Provincial securities legislation and oversight can thus become instruments for accomplishing provincial economic objectives.18 In other words, the Attorneys General of Quebec and Alberta recognize that securities regulation can be used as an instrument in carrying out local or regional economic policies that promote access to capital for particular enterprises. Of course, this calls for a delicate balancing act between the primary objective, protecting investors, and the objective of accommodating the desire of certain local enterprises to operate with less stringent oversight or the government‘s desire to encourage risk capital in certain sectors.  The provincial authorities also recognize that the capital market is now exposed to extraprovincial influences, as a result of global convergence and the integration of economies. We now talk about systemic risk, a phenomenon described in Alberta‘s factum as follows: 58. ―Systemic risk in the capital markets‖ has been defined by the CSA (Rice, GA Exhibits, vol. I, p. 69, para. 229) as: … the risk of a shock (i) affecting a significant number of market participants contemporaneously and (ii) which may directly or indirectly result in (A) a broad decrease in the availability, or a significant increase in the cost, of capital for issuers and individuals and/or (B) a significant erosion of investor confidence in the fairness and efficiency of the capital markets. The International Organization of Securities Commissions (IOSCO) has in fact formed a committee on systemic risk, co-chaired by the Presidents of the AMF and the OSC. In other words, the present provincial regulators recognize that the capital market is now exposed to global risks.  Nonetheless, the Attorney General of Quebec wrote, at para. 23 of his factum, that the purpose of the provincial securities regulatory schemes is today, as it was in the past, [TRANSLATION] ―for the protection of the investor but also for capital market efficiency and ensuring public confidence in the system‖, and added that the main purpose is to protect investors because of their vulnerability (see also paras. 53 and 54). If that is still true, a question I need not answer, he can argue that the ―pith and substance‖ (―caractère véritable‖ or ―caractéristique dominante‖) of the provincial 18 A former CEO of the Montreal Stock Exchange, Pierre Lortie, said in a recent speech that the AMF has helped to ensure the survival of the Montreal Stock Exchange (François Desjardins, ―Pierre Lortie devant l'Ordre des comptables agréés du Quebec - L'AMF a contribué à assurer la survie de la Bourse de Montreal‖, Le Devoir (September 29, 2010)). No.: 200-09-006746-090 PAGE: 20 statutes is still to regulate ―le commerce des valeurs mobilières dans la province‖, which I translate as ―trading/dealing in securities in the province‖: [TRANSLATION] ―contractual transactions of a local nature‖ (para. 42 of the factum) which clearly falls within the jurisdiction of the legislatures, even if that regulation may have extraprovincial effects. The same is true, in his submission, for the Derivatives Act, R.S.Q., c. I-14.01 and the Act respecting the transfer of securities and the establishment of security entitlements, S.Q. 2008, c. 20 (hypothec of dematerialized securities).  Lastly, a recent characteristic of provincial legislation and operational policies applied by provincial commissions must be noted: harmonization (Stéphane Rousseau, L’encadrement du secteur des valeurs mobilières par le Québec et le débat sur une commission nationale des valeurs mobilières, June 2010, document produced by the Attorney General of Quebec). The provinces are aware that the Canadian capital market comprises a single interrelated and interdependent and thus integrated whole, and have agreed to implement a largely standardized regulatory scheme to prevent local practices that could interfere with the efficiency of the market and even cause harmful distortions, such as investors shopping for the jurisdiction that is least stringent or that offers the least protection for investors.19 Quebec cannot avoid this necessary standardization, which is demanded by market forces. When the bill that was to become the Act to amend the Securities Act and other legislative provisions, S.Q. 2007, c. 15, received approval in principle, Monique Jérôme-Forget, then the Quebec Minister of Finance, stated the following:20 [TRANSLATION] The benefits offered to investors do not exist under the general civil liability regime set out in the Civil Code of Québec. For that reason, we must consider the civil liability remedy on the secondary market to be a particular regime that is intended to supplement the general regime. Because the burden of proof the investor must meet is significantly lower, the remedy provides, in exchange, a set of defences that defendants may assert and a set of circumstances in which they cannot be held liable. … Mr. Speaker, it must be noted, on this point, that all the other provinces and territories have already adopted this remedy or are preparing to do so and it will therefore be the same across Canada. The remedy proposed is therefore similar to the Ontario regime, which has also drawn heavily from the other provinces and territories. Only the necessary adaptations have been adopted to reflect the civil 19 In those reasons, the Chief Justice gave examples of the standardization movement headed by the CSA. 20 Journal des débats de l'Assemblée nationale du Quebec, Bill 19, Thursday, October 18, 2007 - Vol. 40, No. 28. No.: 200-09-006746-090 PAGE: 21 law concepts and terminology and to ensure that it can be harmoniously incorporated into Quebec‘s legislative corpus, including the Securities Act, into which it will be incorporated. [Emphasis added.] *****  In short, because the Constitution Act is silent on the subject of ―securities‖, various aspects of the capital market may be regulated under a power assigned either to Parliament (criminal law, federal corporate law, trade and commerce) or to the legislatures (property and civil rights, provincial corporate law, matters of a purely local or private nature). As the Supreme Court of Canada said in Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission),  2 S.C.R. 132, 2001 SCC 37, at para. 62: There are a myriad of overlapping Il existe une myriade de compétences regulatory jurisdictions governing concurrentes en matière de securities transactions. réglementation des opérations sur valeurs mobilières.  In fact, since 1867, the regulation of securities has resulted in action taken by both Parliament and the legislatures. In most cases, the purpose of that action has been to protect shareholders/investors. It would therefore be wrong to argue that since 1867 protection of investors has been within the exclusive jurisdiction of the provinces.  As well, there has been no decision of the Privy Council or the Supreme Court that has held that the regulation of capital markets is a matter within provincial jurisdiction. What those decisions have in fact recognized is that the regulation of trading/dealing in securities in the province falls within the exclusive jurisdiction of the legislatures under section 92 of the Constitution Act. As the Alberta Court of Appeal wrote, the Alberta Securities Act regulates the securities industry, that is, primarily brokers and other intermediaries, as it has done in respect of lawyers and other professionals (paras. 3, 15, 18 and 48 of the decision). Similarly, the Attorney General of British Columbia wrote in his factum in the Supreme Court: ‖Regulation of the sale of securities and regulation of persons and entities involved in the trading of securities is within the exclusive jurisdiction of the province under section 92 of the Constitution Act, 1867‖.  To conclude on this aspect, I adopt the following summary of the current law stated by Dickson J. in Multiple Access at pages 183 to 185, which still applies: It is well established that the provinces Il est bien établi que les provinces ont le have the power, as a matter of property pouvoir, en matière de propriété et de and civil rights, to regulate the trade in droits civils, de réglementer le corporate securities in the province, commerce des actions des compagnies No.: 200-09-006746-090 PAGE: 22 provided the statute does not single out dans la province, pourvu que la loi ne federal companies for special treatment distingue pas les compagnies or discriminate against them in any way. constituées en vertu d‘une loi fédérale There must be no impairment of status or en prévoyant à leur égard des mesures of the essential power to raise capital for particulières ou discriminatoires. On ne corporate purpose. But federal doit pas porter atteinte au statut de la incorporation does not render a company compagnie ni au pouvoir essentiel de immune from securities regulation of réunir des fonds aux fins de la general application in a province. Since compagnie. Mais la constitution d‘une the decision of the Privy Council in compagnie en vertu de la loi fédérale Lymburn v. Mayland,  A.C. 318 the n‘immunise pas la compagnie contre les provisions of provincial securities acts règlements provinciaux d‘application have been given a wide constitutional générale relatifs aux valeurs mobilières. recognition. Anisman and Hogg in Depuis l‘arrêt du Conseil privé Lymburn Proposals for a Securities Market Law of v. Mayland,  A.C. 318, les Canada, at p. 144 speak of ―[j]udicial dispositions des lois provinciales sympathy for provincial securities relatives aux valeurs mobilières ont été legislation‖ adding, at p. 145: largement reconnues sur le plan constitutionnel. Dans l‘Avant-projet d’une loi canadienne sur le marché des valeurs mobilières, at p. 160, Anisman et Hogg parlent de [TRADUCTION] ―sympathie des tribunaux vis-à-vis des législations provinciales sur les valeurs mobilières‖, ajoutant, à la même page: The reluctance of the courts to strike Il est vraisemblable que down provincial securities legislation l‘hésitation des cours lorsqu‘il likely stems in part from the fact that s‘agit de s‘attaquer aux there is no federal securities law so législations provinciales sur les that a declaration of the invalidity of valeurs mobilières vient en partie a provincial act or any of its du fait qu‘il n‘existe pas de loi provisions would create a potential fédérale sur les valeurs gap in the existing regulatory mobilières, de sorte que le fait de scheme that might be exploited by prononcer l‘invalidité d‘une loi the unscrupulous. provinciale ou de l‘une de ses dispositions créerait un vide dans la législation existante qui laisserait le champ libre aux personnes peu scrupuleuses. … As Mr. Justice Fauteux, as he then … Comme l‘a dit le juge Fauteux, alors was, stated in Gregory & Company Inc. v. juge puîné, dans l‘arrêt Gregory & Quebec Securities Commission,  Company Inc. c. Quebec Securities No.: 200-09-006746-090 PAGE: 23 S.C.R. 584 (at p. 588): Commission,  S.C.R. 584 (at p. 588): The paramount object of the Act is to [TRADUCTION] L‘objet ensure that persons who, in the prépondérant de la loi est province, carry on the business of d‘assurer que les personnes qui, trading in securities or acting as dans la province, exercent le investment counsel, shall be honest commerce des valeurs mobilières and of good repute and, in this way, ou qui agissent comme to protect the public, in the province conseillers en placements, sont or elsewhere, from being defrauded honnêtes et de bonne réputation as a result of certain activities et, ainsi, de protéger le public, initiated in the province by persons dans la province ou ailleurs, therein carrying on such a business. contre toute fraude consécutive à certaines activités amorcées dans la province par des personnes qui y exercent ce commerce. In Smith v. The Queen Mr. Justice Dans l‘arrêt Smith c. The Queen, le juge Martland stated (at p. 797): Martland affirme (at p. 797): The Securities Act exists to regulate [TRADUCTION] The Securities the securities business. This is Act existe pour réglementer le achieved through two main forms of commerce des valeurs mobilières. control, the first of which is directed À cette fin, elle prévoit deux towards the persons or companies formes principales de contrôle, selling the securities and the second dont la première vise les of which is directed to the securities personnes ou les compagnies qui being sold. vendent des valeurs et dont la deuxième vise les valeurs offertes en vente. And later (at p. 798): Et plus loin (à la p. 798): Thus control is exercised through [TRADUCTION] Ainsi le contrôle the registration of persons and s‘exerce par l‘enregistrement des companies before they are permitted personnes et des compagnies avant to trade in securities coupled with qu‘elles soient autorisées à faire le what is essentially the registration of commerce des valeurs mobilières the securities themselves before the ainsi que par ce qui constitue securities may be traded in the essentiellement l‘enregistrement des course of a primary distribution to valeurs elles-mêmes avant qu‘elles the public. [emphasis added] puissent être offertes en vente dans le cadre d‘une distribution primaire No.: 200-09-006746-090 PAGE: 24 au public. Two major trends in conflict  As noted earlier, the provincial legislation first focused on the persons involved in trading in securities in the province (requirement that brokers hold a licence), and then, where needed, on protecting investors (prospectuses, customer‘s right to cancel and information to be given by the broker, etc.), which are matters under provincial heads of jurisdiction. The legislation then branched out to prescribing ongoing information, regulating insider trading, auditing issuers‘ accounting and financial activities, regulating proxy solicitation, voting rights and takeovers. Today, the provincial legislation even deals with extraprovincial aspects such as collaboration with investigations outside Canada. In spite of the necessary encroachment on Parliament‘s exclusive jurisdiction in relation to federal corporate law and the regulation of extraprovincial commerce, those extensions have been held to be valid by the Supreme Court, which has associated them with the primary purpose of the legislation, regulation of trading in securities in the province, and which has found there to be no conflict with federal legislation on the same subjects, because they are similar or nonexistent.  It is clear from the legislative evolution of the provincial securities laws that the legislatures have undertaken to regulate as many aspects of the capital market as possible, and not just trading in securities in the province. Does that fact mean that they now have, constitutionally, a vested right to the exclusive authority to regulate all aspects of the securities market? With due respect for my colleagues, I do not think so. There is no due diligence or estoppel theory in constitutional law in relation to the constitutional division of powers.  For its part, Parliament has followed a similar trajectory. Starting with one of its heads of jurisdiction, like banks or federal corporate law, it has increasingly enacted legislation relating to shareholders‘ rights, the obligations of directors, changes in corporate control, share transfers, etc. In other words, it is gradually developing a federal securities regulatory regime, a number of aspects of which have been found to be valid, as noted earlier.  The proposed Act is the ultimate conclusion of the federal trajectory. With its 266 sections, it contains provisions that govern the activities of all capital market participants, in relation to both the primary and secondary aspects of that market, and of issuers and investors, taking in all intermediaries and even the experts who come into their orbit (accountants, rating agencies, etc.). It even creates civil remedies for investors in the provincial courts, the damages for which are quantified according to the formulas prescribed. No.: 200-09-006746-090 PAGE: 25  The possibility that Parliament could enact general legislation in relation to securities has never been ruled out. On the contrary, the Supreme Court has left the door open: In Multiple Access, above, at 173 and 174, Dickson C.J. writes: Parliament has not yet enacted any Le Parlement n‘a pas encore adopté un comprehensive scheme of securities système complet de législation legislation. To date the Canadian concernant les valeurs mobilière. Jusqu‘à experience has been that the provinces ce jour au Canada, ce sont les provinces have taken control of the marketing of qui réglementent le marché des valeurs securities, differing in this respect from mobilières, différant à cet égard des the United States where the Securities États-Unis où la Securities and Exchange and Exchange Commission has Commission réglemente le commerce et regulated trading and primary la distribution primaire des valeurs distribution of securities. I should not mobilières. Je ne veux pas, par mes wish by anything said in this case to propos en l‘espèce, préjudicier au pouvoir affect prejudicially the constitutional right constitutionnel du Parlement d‘adopter of Parliament to enact a general scheme une législation générale concernant les of securities legislation pursuant to its valeurs mobilières conformément à son power to make laws in relation to pouvoir de faire des lois relatives aux interprovincial and export trade and échanges et au commerce commerce. This is of particular interprovinciaux et internationaux. Cela significance considering the revêt une importance particulière compte interprovincial and indeed international tenu du caractère interprovincial et, à character of the securities industry. vrai dire, international du secteur des [Emphasis added.] valeurs mobilières. Estey J., dissenting, writes the following, at 225: Counsel for the Attorney General for Le substitut du procureur général du Canada did not wish to found the validity Canada n‘a pas voulu fonder la validité of these sections upon an independent de ces articles sur un argument claim that, by reason of the potential indépendant portant que, en raison de extraprovincial nature of securities l‘aspect extraprovincial possible du trading, they could be sustained by the commerce des valeurs mobilières, ils authority of s. 91(2) alone. I venture to peuvent s‘appuyer uniquement sur le say that there will be more and more par. 91(2). Je me permets de dire qu‘on challenges in the future to the dominant contestera de plus en plus à l‘avenir la position now occupied by the securities position dominante qu‘occupe maintenant exchange authorities of the province in l‘organisme de réglementation du which the major stock exchange of the commerce des valeurs mobilières de la country is located. As the magnitude province où se trouve la Bourse la plus No.: 200-09-006746-090 PAGE: 26 and number of multi-provincial security importante du pays. À mesure que transactions increase the strain on the s‘accroîtront le nombre et l‘importance present unbalanced regulatory system des opérations multi-provinciales will mount. It remains to be seen relatives aux valeurs mobilières, il en whether this will precipitate a change in sera de même de la pression qui s‘exerce the national appreciation of sur le système de réglementation constitutional requirements and federal actuellement déséquilibré. Il reste à voir legislative policy. Until such a si cela précipitera une modification de development occurs the disposition of l‘évaluation, au niveau national, des this appeal must be found in the light of exigences constitutionnelles et de la the positions herein taken by the parties. politique législative fédérale. En These reasons therefore reflect only the attendant, la décision en l‘espèce doit record as advanced by the proponents être fonction des positions adoptées par and opponents of the traditional les parties. Par conséquent, les motifs en arguments on the constitutional nature l'espèce reflètent uniquement le litige tel of corporate and securities legislation. qu'il a été exposé par les partisans et les [Emphasis added.] adversaires des arguments traditionnels sur l'aspect constitutionnel des lois relatives aux sociétés et aux valeurs mobilières. In Global Securities, above, Iacobucci J. writes, at para. 46: Since the central question presented by Comme la question centrale que soulève this appeal is the power of the province to le présent pourvoi concerne le pouvoir de enact s. 141(1)(b), I decline to comment la province d‘adopter l‘al. 141(1)b), je on the constitutionality of hypothetical m‘abstiens de faire des remarques sur la overlapping federal legislation. I would constitutionnalité d‘une hypothétique loi note, however, that this Court has already fédérale chevauchante à cet égard. Je upheld aspects of federal securities tiens cependant à souligner que notre regulation, in another context, in Multiple Cour a déjà invoqué, dans l‘arrêt Multiple Access, supra, under the ―double aspect‖ Access, supra, la règle du ―double theory. The Court‘s decision in the aspect‖ pour confirmer la validité de present appeal should not be taken in certains aspects de la réglementation any way to question the holding of that fédérale des valeurs mobilières dans un case. [Emphasis added.] autre contexte. L‘arrêt de notre Cour en l‘espèce ne doit nullement être interprété comme mettant en doute l‘arrêt Multiple Access. No.: 200-09-006746-090 PAGE: 27  The day has now come to settle this. This Court‘s answer may be characterized as preliminary since it will be followed by the final answer from the Supreme Court in a few months. Authority of Parliament to enact the proposed Act  It is now settled law that determining the constitutional validity of a statute involves two steps, consisting of, first, characterizing the law in relation to its ―pith and substance‖ (in French, ―caractère véritable‖ or ―caractéristique dominante‖), and second, determining the head of jurisdiction enumerated in sections 91 and 92 of the Constitution Act to which it relates: R. v. Hydro-Québec,  3 S.C.R. 213 at para. 23, Lamer C.J. and Iacobucci J. (dissenting but not on this point); Reference re Same-Sex Marriage, supra at para. 13; Ward v. Canada (Attorney General),  1 S.C.R. 569, 2002 SCC 17 at para. 16. First step  Determining the pith and substance of a statute is a complex exercise and will often be conclusive as to its validity. The exercise focuses on the purpose and effects of the impugned law (Ward at para. 17; Kirkbi AG v. Ritvik Holdings Inc.,  3 S.C.R. 302, 2005 SCC 65 at para. 23; Canadian Western Bank, supra at para. 27; Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39 at para. 18).  The exercise is summarized as follows by the Supreme Court in Ward, at paras. 17 to 20: (1) The Essential Character of the Law (1) Le caractère essentiel de la loi  The first task in the pith and  La première étape de l‘analyse du substance analysis is to determine the pith caractère véritable consiste à déterminer le and substance or essential character of caractère véritable ou essentiel de la loi. the law. What is the true meaning or Quel est le sens véritable ou la dominant feature of the impugned caractéristique dominante de la mesure legislation? This is resolved by looking at législative attaquée? Pour répondre à cette the purpose and the legal effect of the question, il faut examiner l‘objet et l‘effet regulation or law: see Reference re juridique du règlement ou de la loi en Firearms Act, supra, at para. 16. The cause: voir le Renvoi relatif à la Loi sur les purpose refers to what the legislature armes à feu, supra, par. 16. L‘objet désigne wanted to accomplish. Purpose is relevant ce que le législateur a voulu accomplir. Il to determine whether, in this case, est pertinent pour déterminer si, en Parliament was regulating the fishery, or l‘espèce, le Parlement réglementait les venturing into the provincial area of pêcheries ou s‘il s‘aventurait dans le No.: 200-09-006746-090 PAGE: 28 property and civil rights. The legal effect domaine de compétence provinciale de la refers to how the law will affect rights and propriété et des droits civils. L‘effet liabilities, and is also helpful in illuminating juridique désigne la façon dont la loi influe the core meaning of the law: see sur des droits et des obligations, et il est Reference re Firearms Act, supra, at également utile pour comprendre le sens paras. 17-18; Morgentaler, supra, at pp. premier de la loi: voir le Renvoi relatif à la 482-83. The effects can also reveal Loi sur les armes à feu, supra, par. 17-18, whether a law is ―colourable‖, i.e. does the et l‘arrêt Morgentaler, supra, p. 482-483. law in form appear to address something Les effets peuvent également indiquer si within the legislature‘s jurisdiction, but in une loi comporte un ―motif déguisé‖, c‘est- substance deal with a matter outside that à-dire montrer que même si, de par sa jurisdiction?: see Morgentaler, supra, at forme, la loi paraît porter sur un sujet p. 496. In oral argument, Ward expressly relevant de la compétence du législateur, made clear that he is not challenging the elle porte, au fond, sur un sujet qui ne law on the basis of colourability. relève pas de cette compétence: voir l‘arrêt Morgentaler, supra, p. 496. Dans sa plaidoirie, M. Ward a précisé clairement que sa contestation de la loi n‘était pas fondée sur l‘existence d‘un motif déguisé.  The pith and substance analysis is  L‘analyse du caractère véritable n‘est not technical or formalistic: see P. W. ni technique, ni formaliste: voir p. W. Hogg, Hogg, Constitutional Law of Canada Constitutional Law of Canada (éd. feuilles (loose-leaf ed.), vol. 1, at p. 15-12. It is mobiles), vol. 1, p. 15-12. Il s‘agit essentially a matter of interpretation. The essentiellement d‘une question court looks at the words used in the d‘interprétation. Les tribunaux examinent impugned legislation as well as the les termes employés dans la mesure background and circumstances législative attaquée, de même que le surrounding its enactment: see contexte et les circonstances dans lesquels Morgentaler, supra, at p. 483 ; Reference cette mesure a été adoptée: voir l‘arrêt re Firearms Act, supra, at para. 17. In Morgentaler, supra, p. 483, et le Renvoi conducting this analysis, the court should relatif à la Loi sur les armes à feu, supra, not be concerned with the efficacy of the par. 17. Lorsqu‘il procède à cette analyse, law or whether it achieves the legislature‘s le tribunal ne devrait pas se préoccuper de goals: see RJR-MacDonald Inc. v. l‘efficacité de la loi ou de la question de Canada (Attorney General),  3 savoir si elle permet de réaliser les S.C.R. 199, at para. 44, per La Forest J.; objectifs du législateur: voir Reference re Firearms Act, supra, at para. RJR-MacDonald Inc. c. Canada (Procureur 18. général),  3 S.C.R. 199, par. 44, le juge La Forest; Renvoi relatif à la Loi sur les armes à feu, supra, par. 18.  Section 27 of the Regulations, read  L‘article 27 du Règlement, pris alone, is simply a prohibition of sale, isolément, ne fait qu‘interdire la vente, No.: 200-09-006746-090 PAGE: 29 trade or barter, suggesting it might fall l‘échange ou le troc, ce qui pourrait porter à within the provincial rather than federal croire qu‘il relève de la compétence des domain. However, we cannot stop at provinces et non pas de la compétence this point. We must go further. What is fédérale. Cependant, nous ne pouvons pas the purpose of s. 27, and what is its nous arrêter là. Il nous faut aller plus loin. effect? How does it fit into the regulatory Quel est l‘objet de l‘art. 27 et quel en est scheme as a whole? The question is not l‘effet? Quel rôle joue-t-il dans l‘ensemble whether the Regulations prohibit the du régime de réglementation? La question sale so much as why it is prohibited. n‘est pas tant de savoir si le Règlement [Emphasis added.] interdit la vente que de savoir pourquoi celle-ci est interdite.  The pith and substance of the proposed Act can be determined by examining both intrinsic evidence, such as the provisions in which its general purposes are stated and its general structure, and extrinsic evidence, such as the reports that led to it being enacted (Canadian Owners and Pilots Association, supra at para. 18).  As shown by the recent decision of the Supreme Court in Reference re Assisted Human Reproduction Act, 2010 SCC 61, the exercise can be perilous and may lead to very different characterizations of a single text. This case is another example of this, as shown by the characterization adopted by my colleagues in comparison to mine, which, and I say this with the greatest respect, obscures critical elements of the extrinsic evidence.  I will start with a summary of that evidence. After receiving a number of reports from experts recommending a single national regulatory scheme for capital markets (Wise Persons‘ Committee (2003), Crawford Panel report (2006), Hockin Panel report (2009)), and following on a serious global crisis that affected those markets, the federal government announced that it wanted to submit the proposed Act to Parliament once the opinion of the Supreme Court had been received.  Those reports, which comprise admissible extrinsic evidence, show that at present: - Regulation of various aspects of the capital markets is accomplished by a range of legislation, both provincial and federal, and by self-regulation by the stock exchanges and associations of intermediaries; - The present Canadian capital market is complex and eclectic. New instruments are emerging, such as derivatives and synthetic securities, and are sometimes not understood even by sophisticated investors (e.g., commercial paper); - 80 percent of transactions in derivatives involve a party who is not in Canada. Clearly, derivatives transactions are largely international; No.: 200-09-006746-090 PAGE: 30 - Securities are dematerialized and traded instantaneously on the Internet, often without any real service being provided by a broker or other intermediary. Even access to foreign stock exchanges is possible on line, by opening an account with a Canadian broker who in fact provides no advice. The need to ensure the broker‘s integrity in these cases is less pressing than it was over 100 years ago when a broker was absolutely essential, in relation to a materialized security; - A large proportion of the securities of the largest Canadian corporations, such as BCE or Canadian Pacific, are held outside Canada and traded on the New York or London stock exchanges, where they are subject to various foreign laws. Clearly, issues of securities by large Canadian enterprises and the secondary market in those securities have extraprovincial and even international aspects; - Canadian issuers mobilize more capital per issue of debt security at the international level than at the national level.21 In fact, for some companies, we can even talk about a North American capital market. Clearly, for a number of Canadian enterprises, financing activities using securities are largely international activities; - Between 1990 and 2006, the volume of initial share offerings rose by 396 percent in Canada, while the increase was only 128 percent in the United States, 163 percent in the United Kingdom and 220 percent in Australia. A larger proportion of new Canadian firms needing capital therefore make public offerings in Canada than elsewhere. In other words, the availability of an effective and competitive capital market is more critical in Canada than elsewhere; - In 2009, the market capitalization of companies listed on the TSX and TSXV rose by 55 percent, compared to 28.5 percent on the NYSE and 44 percent on the NASDAQ. There are currently over 3,800 companies listed on the TSX and the TSXV, compared to 5,100 in the United States, where the population is 10 times higher. Clearly, regulating securities means more than regulating an industry; it means regulating the main source of capital for nearly 4,000 Canadian companies operating in all sectors of the Canadian economy; - Capitalization of listed companies in Canada is much lower than in the United States; in fact, 64 percent of companies listed in Canada would be unable to list in the United States. The Canadian securities market therefore includes a large element of penny stock or risk capital companies; - The experts add that 16.15 percent of small public securities issues involve four or more provincial jurisdictions and that 83.85 percent of them involve three jurisdictions or fewer. In fact, a miniscule portion, only five percent, of initial public 21 Report of the Wise Persons‘ Committee at 7. No.: 200-09-006746-090 PAGE: 31 offerings involve only one securities commission.22 Clearly, even small public securities issues constitute essentially extraprovincial activities; - Every day in Canada, 750 million shares change hands, representing a value of about $7 billion.23 Clearly, the secondary market comprises a major activity in the Canadian economy; - Stock exchange activities in Canada have been divided into three electronic trading floors since 1999. Since 2008, the three stock exchanges have been owned by the same financial group, TMX Group Inc. Each category of security is now listed on a single stock exchange for the entire country. The trend toward consolidation is even a global one, as can be seen in the grouping of the major foreign stock exchanges. Clearly, the three Canadian stock exchanges are now companies whose activities are primarily extraprovincial and international; - The Canadian capital market consists of diverse and very sophisticated participants in addition to small investors, such as mutual funds and pension plans. All residents of Canada are, directly or indirectly, holders of securities (portfolio, mutual funds, pension plan, RRSP, etc.). Clearly, the securities market now affects all Canadians; - A very large majority of mutual funds are located in Ontario (over 80%). These funds are increasingly investing outside Canada. To date, their main regulator is the OSC, which refuses to adhere to certain homogenized policies or practices, such as the single passport; - Traditional brokerage firms have been acquired by banks or other financial institutions.24 While the four pillars of the economy (banks, trust companies, insurance companies and securities firms) were quite separate in 1867, it must be acknowledged that this is no longer the case, with the banks having absorbed the major brokerage firms and trust companies, to offer a range of services, branching out all the way to insurance (Canadian Western Bank, supra, para. 1).25 While that recent interpretation gives the major banks more clout and 22 Cécile Carpentier & Jean-Marc Suret, Réglementation des valeurs mobilières au Canada: un réexamen des arguments avancés pour justifier la commission unique, June 23, 2010, at 66. 23 Minister of Finance of Quebec, Monique Jérôme-Forget, Journal des débats de l’Assemblée nationale du Quebec, Bill 19, Vol. 40, No. 28 (Thursday, October 18, 2007). 24 Marion G. Wrobel, Report of Canadian Bankers Association Regarding Parliament’s Jurisdiction to Create a National Securities Regulator, document dated August 26, 2010, produced by the Canadian Bankers Association. 25 The Alberta Court of Appeal stated, at para. 2 of its decision, citing a passage from Canadian Western Bank, that the three pillars, excluding the banks, have historically been regulated solely by the provinces. That is true in terms of the relationship between the customer and the company. For example, trust contracts, insurance contracts or securities purchase contracts are regulated by the provinces, while the relationship between the bank and its customers is regulated by Parliament, and suppletively by the provinces. However, it must be added that regulation of insurance and trust No.: 200-09-006746-090 PAGE: 32 more revenue, it exposes them to risks that would formerly have contaminated only one other pillar of the economy that is unrelated to them; - Canadians increased the value of their investments in shares and debt security outside Canada by 36 percent between 2005 and 2009, with the value rising from $279.1 to $379.5 billion. Again, the extraprovincial aspect of Canadian investors‘ activities is striking; - The Canadian capital market is totally integrated (only one stock exchange for each security; intermediaries regulated by national associations or groups, for example the IDA;26 leading brokerage firms acquired by banks or other financial institutions and operating Canada-wide), forming a vast single and now indivisible entity. The provinces are aware of this fact, and work together and enact standardized legislation, and the commissions work together within the CSA27 to develop harmonized policies, like the passport. Clearly, the Canadian capital market has become integrated and forms a single whole that cannot be described as a mere collection of provincial markets; - Markets fluctuate globally; a drop in one regional stock exchange can lead to major fluctuations on exchanges located thousands of kilometres away. All parties recognize that there are new systemic risks associated with the globalization of markets.28 In response, the leaders of the G-20 and global economic organizations are calling for international coordination, particularly in respect of systemic risk management. The regulatory agencies in each country must be capable of assessing the situation in real time and responding rapidly.  In short, the trend noted by the Supreme Court in Global Securities, supra, para. 28, has not just persisted, it has intensified: ―The securities market (in the French version, ―le marché des valeurs mobilières‖) has been an international one for years‖, an observation that it reaffirmed the next year in Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario, supra at para. 62: ―Capital markets and securities transactions are becoming increasingly international. companies is in fact divided, and federal trust and insurance company legislation have existed for a long time. In the area of insurance: Insurance Act, S.C. 1885-1886, c. 45; Insurance Act, S.C. 1910, c. 32; Insurance Act, S.C. 1917, c. 29; Canadian and Britisih Insurance Companies Act, S.C. 1932, c. 46, Foreign Insurance Companies Act, S.C. 1932, c. 47; Insurance Companies Act, S.C. 1991, c. 47. See also An Act to Authorize the Establishment of Mutual Fire Insurance Companies, 4 Will. IV, c. 33. For trust companies: Trust Companies Act, S.C. 1914, c. 55; Trust and Loan Companies Act, S.C. 1991, c. 45. We have also seen trust companies or insurance companies move from one jurisdiction to another to take advantage of different requirements or powers. The federal Superintendent still plays a large role in the area of insurance and trusts, however. 26 Investment Dealers Association of Canada, the self-regulatory body recognized by the commissions, including the AMF. 27 Canadian Securities Administrators. 28 Hockin Panel, Final Report and Recommendations, 2009 at 2 and 3. No.: 200-09-006746-090 PAGE: 33  It is against this backdrop, of a Canada-wide, integrated capital market, where transactions are essentially interprovincial and international, a situation radically different from the one that existed in 1867 or even 15 years ago, that the federal government would like to submit the proposed Act to Parliament.  This completes the consideration of the extrinsic evidence. I will now move on to an analysis of the text.  The purpose of the proposed Act is described as follows in the preamble and section 9: Preamble Préambule Whereas: Attendu: Capital markets affect the well-being Que les marchés des capitaux touchent le and prosperity of all Canadians; bien-être et la prospérité de tous les Canadiens; Capital markets are increasingly Que les marchés des capitaux prennent national and international in scope; une ampleur nationale et internationale accrue; Capital markets are rapidly evolving Que les marchés des capitaux évoluent and include increasingly complex rapidement et comportent des produits financial products and methods of financiers et des méthodes de placement distribution and trading; et de négociation de plus en plus complexes; It is important for Canada to have Qu‘il est primordial pour le Canada d‘avoir competitive capital markets and a des marchés des capitaux compétitifs et strengthened, comprehensive and assujettis à un régime de contrôle coordinated enforcement regime for d‘application de la loi renforcé, complet et those markets; coordonné; It is in the national interest to effectively Qu‘il est dans l‘intérêt national de protect and promote Canadian protéger et de promouvoir efficacement interests internationally, including les intérêts du Canada à l‘étranger, through the development of consistent notamment par l‘élaboration d‘orientations regulatory policies for capital markets; cohérentes en matière de réglementation des marchés des capitaux; The integrity and stability of Canada‘s Que la présence, au sein du régime financial system would be enhanced by réglementaire canadien du secteur No.: 200-09-006746-090 PAGE: 34 the presence of a single Canadian financier, d‘un seul organisme canadien securities regulator as part of the de réglementation des valeurs mobilières Canadian financial regulatory rehausserait l‘intégrité et la stabilité du framework; système financier du Canada; Parliament intends to create a single Que le Parlement entend créer un tel Canadian securities regulator, organisme, encadré par un régime supported by a comprehensive législatif et réglementaire complet qui statutory and regulatory regime that s‘applique dans l‘ensemble du Canada; applies across Canada; and Parliament chooses to do so through a Que le Parlement choisit de le faire au process under which the regime will apply moyen d‘un processus au titre duquel as willing provinces and territories opt in; le régime s‘appliquera au fur et à mesure que les provinces et territoires intéressés y adhéreront, Section 9 Article 9 PURPOSES OBJET DE LA LOI 9. The purposes of this Act are 9. La présente loi a pour objet de: (d) to provide protection to investors d) Protéger les investisseurs contre les from unfair, improper or fraudulent pratiques déloyales, irrégulières ou practices; frauduleuses; (e) to foster fair, efficient and e) Favoriser des marchés des capitaux competitive capital markets in which justes, efficaces et compétitifs en the public has confidence; and lesquels le public a confiance; (f) to contribute, as part of the Canadian f) Contribuer, dans le cadre du régime financial regulatory framework, to the réglementaire des finances du Canada, integrity and stability of the financial à l‘intégrité et à la stabilité du système system. [emphasis added] financier.  To achieve these purposes, the government would like to propose that Parliament act by adopting a range of measures, from criminal offences to administrative sanctions to civil remedies, registration and oversight of market participants, institution of professional conduct standards for intermediaries and third parties associated with the securities market, ongoing and occasional information, No.: 200-09-006746-090 PAGE: 35 regulation of securities issues on the primary market, transactions on the secondary market, stock exchange transactions and clearing house transactions, supervision of self-regulatory bodies, insider trading, record keeping, the creation of an agency and its regulatory, investigative and prosecutorial powers, its capacity to act in coordination with other regulatory agencies and bodies, as needed, such as the Department of Finance, the Bank of Canada and the Superintendent of Financial Institutions, and the implementation of mechanisms by which the federal government could intervene in normal and emergency situations. The proposed Act will be supplemented by a large body of future regulations.  It is true that the proposed Act is in large part modeled on the Alberta Securities Act, that two of its purposes, to protect investors and maintain a sound and effective market, are found in the provincial statutes, and that the methods for achieving them are similar to those already in place.  Its second purpose, however, ―to foster fair, efficient and competitive capital markets in which the public has confidence‖, is broader than the purpose that might be stated in a provincial statute, since the provincial statute focuses on the capital market in the province. The proposed Act also asserts a desire to have regard to provincial and regional interests, a factor that a provincial authority does not take into consideration, since it is, and rightly, concerned with promoting its province, and not its neighbour.  The proposed Act contains elements that are novel in comparison to the provincial statutes: provisions on systemic risks and provision for the federal government and its Minister of Finance to act, that I think it is important to reproduce here: 109 (3) On request by the Chief 109 (3) Sur demande du régulateur en Regulator, a market participant must chef, le participant du marché lui fournit provide the Chief Regulator with the l‘information pouvant être exigée en vue information that may be required for the de la contribution à l‘intégrité et à la purpose of contributing to the integrity stabilité des marchés financiers ou de and stability of financial markets or l‘analyse en matière d‘orientations conducting policy analysis related to the concernant l‘exécution de la présente loi administration of this Act or to securities ou la réglementation des valeurs regulation in general. mobilières en général. 228 ... 228 … (4) Despite subsection (1), a notice is (4) Malgré le paragraphe (1), la not required to be published in the publication d‘un avis n‘est pas exigée following circumstances: ... dans les cas suivants: … (c) the Authority considers that c) d‘une part, l‘Autorité est d‘avis there is an urgent need for the que le projet de règlement No.: 200-09-006746-090 PAGE: 36 proposed regulation and that, répond à un besoin urgent et without it, there is a substantial que, sans celui-ci, les risk of material harm to investors investisseurs ou l‘intégrité ou la or to the integrity or stability of stabilité des marchés des capital markets, and the Authority capitaux risqueraient fortement has the Minister‘s consent to de subir un préjudice important make the regulation and to not et, d‘autre part, elle a obtenu publish a notice. l‘agrément du ministre quant à la prise du règlement et à la non- publication de l‘avis. 231(1) The Governor in Council may 231(1) Le gouverneur en conseil peut, make an order requiring the Authority to par décret, ordonner à l‘Autorité undertake the process set out in d‘entreprendre le processus prévu aux sections 228 to 230 in order to have the articles 228 à 230 afin de prendre, de Authority make, amend or repeal a modifier ou d‘abroger un règlement en regulation under section 227, as vertu de l‘article 227, de la façon provided in the order. précisée au décret. 232 (1) The Governor in Council may 232 (1) Le gouverneur en conseil peut, make an order requiring the Authority to par décret, ordonner à l‘Autorité la prise, make, amend or repeal a regulation la modification ou l‘abrogation, dès que under section 227, as provided in the possible et de la façon précisée au order, as soon as practicable, if the décret, d‘un règlement au titre de Governor in Council is of the opinion l‘article 227 s‘il est d‘avis que la mesure that there is an urgent need for such a répond à un besoin urgent et que sans measure and that, without it, there is a elle les investisseurs ou l‘intégrité ou la substantial risk of material harm to stabilité des marchés des capitaux investors or to the integrity or stability of risqueraient fortement de subir un capital markets. préjudice important.  The Canadian Securities Transition Office, established by sections 295, 296 and 297 of the Budget Implementation Act, 2009, states, in the July 12, 2010, transition plan: Regulatory Approach Approche de réglementation The CSRA will take a risk-based, L'ACRVM appliquera à la outcomes-focused approach to réglementation une approche fondée regulation, identifying and responding to sur les risques et axée sur les résultats threats to investors and the integrity and qui cernera les menaces pour les stability of capital markets. It will be investisseurs de même que pour committed to ensuring that the cost of l'intégrité et la stabilité des marchés de regulation is commensurate with the capitaux, et y réagira. Elle s'engagera à No.: 200-09-006746-090 PAGE: 37 intended benefits and that investor faire en sorte que le coût de la protection is at the core of all of its réglementation soit proportionnel aux regulatory activities. It will set national retombées escomptées et que la standards that are informed by, and protection des investisseurs soit sensitive to, the needs of investors and toujours au coeur de toutes ses activités market participants in all parts of de réglementation. Elle établira des Canada and all sectors of the market. normes nationales qui seront guidées (p.3) par les besoins des investisseurs et des participants du marché de partout au Canada et de tous les secteurs du marché, et qui y seront sensibles. … ... An Effective Contribution to the Contribution efficace à l'intégrité et à Integrity and Stability of the Financial la stabilité du système financier System Les événements récents démontrent Recent events demonstrate that capital que l'activité sur les marchés de market activity can be a source of capitaux peut engendrer des risques systemic risks that threaten the stability systémiques qui menacent la stabilité of financial systems nationally and des systèmes financiers à l'échelle internationally. While provincial nationale et internationale. Même si les regulators have had some exposure to organismes provinciaux de systemic risk issues as part of the réglementation ont une certaine informal Heads of Agencies group, the connaissance des enjeux des risques CSRA‘s mandate to contribute to the systémiques du fait de leur présence au integrity and stability of the financial sein du groupe informel des system, as part of the Canadian responsables d'organismes1, le mandat financial regulatory framework, is new to de l'ACRVM de contribuer à l'intégrité et securities regulation in Canada. (p.9) à la stabilité du système financier à titre d'intervenant du cadre canadien de réglementation financière constitue un nouveau volet de la réglementation des valeurs mobilières au Canada.  Plainly, the proposed Act is a general scheme of securities legislation, within the meaning of Multiple Access. In light of the foregoing, I find that its pith and substance is the regulation of all participants in what is now a single, integrated Canada-wide market, characterized by essentially interprovincial and international transactions. I therefore agree with the Alberta Court of Appeal, per Slatter J.A., which stated the following at para. 14: No.: 200-09-006746-090 PAGE: 38  … The parties agree that the pith and substance of the proposed legislation is the regulation of the participants in the public capital markets in Canada, and transactions relating to the raising of capital.  The desired effects of the proposed Act, if it becomes law, are diverse: protection of investors (sporadic and ongoing information, prevention of fraud, competence of intermediaries, civil remedies), transparency in the securities market, standardization of rules, facilitation of access to capital, improvement of sanctions and minimization of systemic risks.  In reality, investor confidence is an important and even essential element in achieving the purpose of the proposed Act, preserving a vigorous capital market in Canada, which is needed to ensure that thousands of Canadian enterprises have access to financing other than bank financing so they will continue to contribute to the prosperity of the country and its population. As the Barreau du Québec pointed out in its factum, at para. 36, the federal government‘s aim in the proposed Act is to accomplish macroeconomic objectives for all of Canada, which does not rule out regional aspects adapted to local needs (see section 16 (1)(b) of the proposed Act).29 If the proposed Act is passed by Parliament, the Government of Canada will have a significant tool for managing Canada‘s monetary and economic policy and will be able to ensure the stability of the capital market otherwise than by informal cooperation meetings with the existing provincial commissions.  To summarize, the proposed Act is part of an economic policy designed to preserve the capital market in Canada, a market that is now an integrated, single, cross- Canada market characterized by essentially extraprovincial transactions, by regulating market participants and transactions. That is its pith and substance, and we must avoid confusing that with the methods chosen for achieving it, which in fact cannot help but resemble the methods used by the provinces and elsewhere in the world. Second step  Is there authority under section 91 of the Constitution Act that allows Parliament to enact the proposed Act, in whole or in part? To answer that question, in interpreting the heads of power enumerated in sections 91 and 92 of the Constitution Act, we must remember that they have to be continually adapted to new circumstances (Reference re Same-Sex Marriage, supra at para. 30). In other words, the interpretation must evolve (Canadian Western Bank v. Alberta, supra at para. 23). 29 The proposed Act includes a Council of Ministers that includes all provinces and territories (sections 11 and 13) and calls for reports to and consultation with those Ministers (sections 12, 19(2), 21, 50(6), 61(3)). As well, the Authority‘s board of directors must be representative of the regions (section 19(3)(b)). No.: 200-09-006746-090 PAGE: 39  That being said, I will move on to the possible heads of power under which Parliament could enact the 16 parts of the proposed Act, in whole or in part. (i) Jurisdiction in relation to criminal law  The provisions found in Part 10, Division 6, of the proposed Act are undeniably criminal in nature and intra vires Parliament under section 91(27). The argument by the Barreau du Québec that because the rest of the proposed Act is invalid, nothing survives, including the criminal provisions, is without merit. In fact, counsel for both Alberta and Quebec and my colleagues in the group of three concede the validity of that Part.  I would add that the same is true of the interpretive portion of Part 2 relating to the Canadian Securities Regulatory Authority (the Authority), in so far as the Authority is made responsible for the administration of the criminal provisions and powers assigned to it: investigations, seizures, prosecutions, and so on (Reference re Assisted Human Reproduction Act, supra at para. 124). I would note that Parliament may assign the power to a federal agent to commence prosecutions, and that this does not preclude the provincial Crown, which may prosecute as of right (A.G. (Can.) v. Can. Nat. Transportation, Ltd.,  2 S.C.R. 206). (ii) Jurisdiction in relation to federal corporate law  As noted earlier, the courts have long recognized that Parliament‘s jurisdiction in relation to federal corporate law allows it to regulate all essential aspects of the proper operation of corporations under federal authority, including the distribution of their securities, directors‘ duties and responsibilities, the company‘s relations with shareholders, ongoing information and prospectuses, proxy solicitation, voting rights, forced redemptions, takeovers, insider trading, and so on.  Parliament‘s authority to enact Parts 6, 8, 9, 10, 12 and 13 of the proposed Act, which essentially deal with matters of corporate law, in relation to enterprises incorporated under the authority of Parliament, seems to me to be indisputable (Multiple Access, supra). It follows that Parliament could establish an agency and a specialized tribunal and give them the budgets and powers needed (Parts 2, 3, 4, 11 and 14) to enforce compliance with those portions of the proposed Act by corporations under federal authority.  Because the power to incorporate legal entities, including insurance and trust companies, is divided between Parliament and the legislatures, and large corporations that issue securities are governed by federal legislation (Air Canada, CP, CN, BCE, banks, certain insurance and trust companies, communications companies, etc.), Parliament could regulate numerous aspects of the securities currently covered by provincial statutes, for the largest Canadian issuers by enacting the proposed Act. In the event of conflict, the federal rules would be paramount. No.: 200-09-006746-090 PAGE: 40  However, we might wonder what limits there are on Parliament‘s power to legislate in relation to federal corporate law. Certainly, the Supreme Court says that it extends to shareholders, directors, officers and employees of those corporations (Multiple Access, supra, p. 176), but can that cover brokers, rating firms, stock exchanges and market participants‘ self-regulatory bodies?  In any event, the approach based on the federal corporate law head of power could only lead to greater complexity in securities regulation, since transactions relating to federal corporations might be subject to rules that were different from corporations governed by provincial statutes, when the capital market calls for homogenization, as the efforts of the various provincial authorities to harmonize the regulations demonstrate. (iii) Jurisdiction in relation to extraprovincial transactions  To avoid that, the federal government seeks to base its authority on the regulation of trade and commerce (section 91(2)), to make the legislation applicable to all actors in the Canadian capital market.  Before determining whether the indicia developed by the Supreme Court for validating the use of that authority by Parliament have been met, we must verify that there is a rational basis to justify the proposed federal legislation, or it consists, rather, of a pretext, a coloured attempt. In the words of Laskin C.J., writing for himself and Judson, Spence and Dickson JJ. in Reference re Anti-Inflation Act,  2 S.C.R. 373 at 423: ‖the extrinsic material need go only so far as to persuade the Court that there is a rational basis for the legislation which it is attributing to the head of power invoked in this case in support of its validity‖. In this case, in light of the context summarized earlier, there is an obvious rational basis, within the meaning of Reference re Anti- Inflation Act, as between the proposed Act and the federal government‘s argument that it is related to Parliament‘s authority to regulate trade and commerce.  The leading case on the interpretation of the power to regulate trade and commerce is General Motors, supra. The Supreme Court wrote that the jurisprudence has recognized two branches of that power: (i) the regulation of international and interprovincial trade and commerce, and (ii) the regulation of trade and commerce affecting Canada as a whole.  As the Attorney General of Alberta states (factum, paras. 95 and 96, and in oral argument), a federal statute that was limited to the interprovincial and international aspects of trading in securities might be valid under the first branch.30 My colleagues in the group of three avoid that point, undoubtedly being aware that it jeopardizes their hypothesis of exclusive provincial power over the regulation of securities and the 30 The Attorneys General of British Columbia and Saskatchewan seem to share that view in their factum in the Supreme Court. No.: 200-09-006746-090 PAGE: 41 absence of a double aspect in the subject matter. However, 95 percent of public issues, even the smallest, have an extraprovincial dimension, since they involve the distribution of securities in more than one province. Parliament could therefore make the proposed Act in its entirety applicable to that dimension of public issues and the participants in them. That would include the three stock exchanges and CDS Clearing and Depository Services (Services de dépôt et de compensation CDS) (Jean Leclair, ―‘Please, Draw Me a Field of Jurisdiction‘: Regulating Securities, Securing Federalism‖ (2010), 51 S.C.L.R. (2d), 555 at 565-566), or, at least, their interprovincial and international activities, that is, a majority of their operations, and the participants involved.  If Parliament adopted that approach, the result would be a regime that would apply to transactions characterized as interprovincial and international, in addition to transactions by the enterprises under federal jurisdiction referred to earlier. The new regime would apply to a very large majority of securities transactions in Canada, but would not regulate the entire capital market. Strictly intraprovincial transactions that do not involve a corporation under federal law would not be covered by the proposed Act, except for the criminal law provisions. That would be the case for a mining company in British Columbia that issued shares only in that province or a gas company in Alberta that issued shares only in Alberta.  Under that approach, a lot of time would undoubtedly be devoted to determining the nature of certain transactions. To avoid that, some opponents propose establishing a national agency whose mandate it would be to administer both the federal and the provincial legislation, somewhat as is the case for chicken and egg marketing. They add that this solution would be more compatible with cooperative federalism. That is the approach endorsed by the Chief Justice in his reasons.  To date, the federal government seems to have rejected that option, preferring a federal law of general application, including the intraprovincial aspects of the securities market; this can be justified only by relying on the second branch of its authority under 91(2), the regulation of trade and commerce affecting Canada as a whole. This is a policy choice (choix politique) that is quite simply not conclusive as to the outcome of the reference, as Laskin C.J. wrote in Reference re Anti-Inflation Act, supra at 421: No doubt, federal-provincial co- Il n‘y a pas de doute que la coopération operation along the lines suggested fédérale-provinciale dans le sens might have been attempted, but it does suggéré aurait pu être essayée, mais il not follow that the federal policy that ne s‘ensuit pas que la politique fédérale was adopted is vulnerable because a adoptée est vulnérable parce qu‘on n‘a co-operative scheme on a legislative pas tenté au préalable l‘application d‘un power basis was not tried first. Co- système coopératif. Le fédéralisme operative federalism may be coopératif peut résulter d‘une absence consequential upon a lack of federal de pouvoir législatif fédéral, mais il ne legislative power, but it is not a ground peut être invoqué pour le contester. No.: 200-09-006746-090 PAGE: 42 for denying it. [emphasis added] (See also Firearms Reference).  In this case, the judges‘ role is therefore limited to determining whether the option preferred by the federal government can result in constitutionally valid legislation, and not taking on the role of promoting a policy approach different from the one adopted to date by the Government of Canada. (iv) Jurisdiction in relation to the general regulation of trade  In General Motors, supra, Dickson C.J. focused on seeking a general rule that strikes a fair balance between Parliament‘s jurisdiction in relation to general trade and commerce and the provinces‘ jurisdiction in relation to property and civil rights. He formulated a set of indicia, in the form of questions, for determining ―whether an activity should be regulated by Parliament as opposed to the provinces‖ (Kirkbi, supra at para. 16). Those questions were summarized by LeBel J. in Kirkbi at para. 17: (i) Is the impugned legislation part of a regulatory scheme? (ii) Is the system monitored by the continuing oversight of a regulatory agency? (iii) Is the legislation concerned with trade as a whole rather than with a particular industry? (iv) Is the legislation of a nature that the provinces jointly or severally would be constitutionally incapable of enacting? (v) Would the failure to include one or more provinces or localities in a legislative scheme jeopardize the successful operation of the scheme in other parts of the country?  Dickson C.J. stated that these factors ―are not exhaustive‖, ―nor is the presence or absence of any of these five criteria necessarily determinative‖ (General Motors at 662-663; see also Kirkbi, para. 17).  The presence of the first two factors is not in issue here, as acknowledged in the factums of the three opponents, the Attorney General of Alberta (para. 111), the Attorney General of Quebec (para. 75) and the Barreau du Québec (para. 58). I agree. If the proposed Act were enacted, it would result in a complete regulatory scheme for the Canadian capital market with the aim of eliminating activities that could hinder its competitiveness, could harm enterprises looking for capital, and could prejudice investors, under the authority of a single regulatory and oversight body, the Authority. I will therefore not devote any more time to looking for those first two factors. No.: 200-09-006746-090 PAGE: 43  I will move on to the third: is the legislation concerned with trade as a whole rather than with a particular industry? The proposed Act is not concerned with a specific supply of goods or services, such as the provision of investment advice, the operation of a stock exchange or the sale of shares by mining companies; rather, it is concerned with all aspects of the capital market in Canada. If the proposed Act were enacted, Parliament would not be seeking to regulate a local transaction, such as the sale of a fire insurance policy to a subscriber by an insurance company in the province (Parsons, supra), or a particular industry, such as brewing (Labatt Breweries of Canada Ltd. v. Attorney General of Canada,  1 S.C.R. 914), or various unrelated local industries; rather, it would be all participants in the Canada-wide capital market, a market so integrated that it has prompted the provinces and territories to harmonize their securities legislation. The proposed Act is not limited to regulating the securities industry or, as noted earlier, in my eighth comment, enterprises whose primary business is trading in securities; rather, it extends as well to suppliers of services such as stock exchanges and clearing settlement houses, professionals like external accountants, issuing corporations (nearly 4,000) and their officers, and mutual funds. It is no less than an entire sector of the Canadian economy that is affected.  The third factor is plainly present, unless it is made a requirement such that it de facto neutralizes Parliament‘s jurisdiction under the second branch of 91(2), in relation to general trade and commerce, as proposed by my colleagues who are thus trying to revive an old interpretation by the Privy Council that has in fact been rejected by the Privy Council itself and then by the Supreme Court. They seem to forget that these factors are intended only to distinguish between an economic issue of national interest and one that is simply a set of local issues (Parsons, supra, and Attorney General of Canada v. Can. Nat. Transportation, Ltd.,  2 S.C.R. 206 at 268, cited with approval in Kirkbi at para.17). Refusing to acknowledge that if Parliament enacted the proposed Act it would be tackling an economic issue of national interest can be explained only by an all-out defence, although well articulated, of their theory of the exclusivity of control over securities by the provinces.  I would add that the sale of insurance products is in no way comparable to the sale of shares on the primary or secondary market. A fire insurance contract between an insurer and a subscriber is an isolated transaction, the terms of which are defined in the contract, which is often regulated, between the insurer and insured. It can come as no surprise that the Privy Council saw that as no more than a private matter relating to civil rights in the province (Parsons). While an insurer may do business across the country and even around the world, each contract it signs with an insured is still a unique transaction between it and the insured, with no need to involve a third party or parties such as a stock exchange, issuing company, and so on. As well, the sale of insurance policies is an isolated sector of the economy, an important sector, certainly, but a limited one, unlike access to the capital market, which is vital for over 60 percent of Canadian enterprises, whatever business they are in. No.: 200-09-006746-090 PAGE: 44  Some have also tried to persuade us that trading in securities is now a strictly local matter between an investor and a broker operating31 in the province, followed by other separate, local transactions elsewhere. In support of that position, they cite the existence of the centralized depository system (CDS) in Toronto, where registered shareholders are often brokers and not individual investors.32 The result would be that the investor is doing business only with their broker‘s local representative, who buys and sells securities at the investor‘s request, with the securities remaining at all times under the control of the broker or CDS, which has a separate legal relationship with the broker. With respect, that approach must be rejected, as we are urged to do by Robert Leckey and Eric Ward, Taking Stock: Securities Matters and the Division of Powers, (1999) 22 Dalh. L.J. 250 at p. 272: We suggest that analysis of the Canadian securities markets as simply a co-existence of separate local industries is myopic. In reality, securities are negotiated at a price determined on a stock exchange, often located outside the investor‘s jurisdiction; holding the securities gives the investor a bundle of rights against the issuer, which is often located outside the investor‘s jurisdiction, and even against third parties (for example, auditors or officers), and a broker registered in CDS‘s records is merely the nominee of the client, who is, in law, the true owner of the securities. The fact that the security is dematerialized, for convenience, does not mean that it is not an intangible movable property sold or purchased in the course of essentially extraprovincial transactions.  Let us move on to the fourth factor. Opponents of the federal initiative and my colleagues argue that the provincial commissions, acting together, are capable of regulating the entire Canadian capital market, and accordingly federal action is not valid. They add that the proof of this is that the provincial commissions are capable of acting jointly, all except for Ontario having signed on to the Canada-wide policy regarding authorization of prospectuses referred to as the single passport, in 2004. 31 The requirement that a broker reside in the province has been relaxed. 32 The role of the Central Depository System, a company located in Toronto, is defined on its website as follows: ―CDS is accountable for the safe custody and movement of depository-eligible domestic and international securities, accurate record-keeping, processing post-trade transactions, and collecting and distributing entitlements arising from securities deposited by customers. Securities may be held in book form (BEO – book-entry-only), non-certificated inventory (NCI), deferred certificated inventory (DCI) or certificate form. CDS manages the safekeeping of securities in both physical certificate and electronic form for its participants. Most CDS-eligible securities are in physical certificate form and are held by CDS or transfer agents and registered in CDS‘s nominee name. Once physical securities are deposited with CDS, CDS enters them in a ledger and they trade electronically. CDS‘s electronic system virtually eliminates the risk of securities being lost, damaged or stolen. More than 88,000 equity and debt security issues are eligible for deposit at CDS. Of these, 60 per cent are Canadian issues and 40 per cent foreign, mostly U.S. About 200 issues are interlisted on two or more exchanges‖. http://www.cds.ca/cdsclearinghome.nsf/Pages/-EN-Depositorysystem?Open. Accessed on March 16, 2011. No.: 200-09-006746-090 PAGE: 45  In my opinion, that argument is based on a false premise, as Professor Lee writes, supra at p. 104: Consider the fourth criterion: provincial incapacity. The principle underlying the criterion is that there cannot be gaps in the distribution of powers. It follows that if it is established that the provinces lack the power to enact a law on a given subject-matter, then it should be the case that Parliament possesses the power to enact it. Thus, provincial incapacity is a "strong indication" of federal jurisdiction. However, the converse is not true. There is no constitutional principle against overlapping legislation - quite to the contrary. Therefore, one cannot reason from the premise that the provinces possess the power to enact a given law to the conclusion that Parliament does not. Provincial capacity is not an indication (strong or otherwise) of the absence of federal jurisdiction. [Emphasis added]  In any event, even with the greatest goodwill, the jurisdiction of each of those bodies is still provincial, while the capital market is now interprovincial and international, there is only one stock exchange in Canada for each category of securities, the number of principal participants is limited, and their control is often located in a province that has not signed on to the Canada-wide policy. In a share distribution, the issuer may be located in Alberta, the purchaser in Nova Scotia and the rating agency in Montreal, the security may be listed on the TSXV and the intermediary may be an on-line service offered by a broker whose head office is in Toronto. Five provincial bodies could assert the right to act, and conflicts of rules or decisions are still possible, while a national regulator could supervise all participants (most of them in fact are self-regulated by a national organization and not local associations) directly and consistently. Only a national agency can have simultaneous jurisdiction over all participants in a transaction, including being able to investigate all aspects of the transaction without calling in assistance.  The possibility of rapid market fluctuations caused by a systemic risk adds an economic problem that it is impossible to resolve through cooperation among more than ten bodies that are answerable to an equal number of Ministers of Finance. In reality, regulation of all aspects of an integrated Canada-wide market by thirteen bodies can only be a complex process, ill-suited to managing systemic risks in real time.  As well, the proposed Act allows the Governor in Council to issue directions to the Authority, and so, where necessary, to the Minister of Finance, to coordinate the Minister‘s actions with the other important actors in Canada‘s economic policy, such as the Bank of Canada, the Office of the Superintendent of Financial Institutions, and so on. The Minister of Finance of Canada cannot order the provincial bodies to do anything, as they are not under his ministerial authority.  Moreover, only a federal agency could have access to all coercive measures available, whether regulatory, penal or criminal, and use the ones most appropriate in No.: 200-09-006746-090 PAGE: 46 each case, thus avoiding parallel proceedings being brought against a single person for the same violation, sometimes duplicating efforts, as in the Norbourg case, where there were penal proceedings initiated by the AMF and criminal proceedings by the Crown.  As well, in the case of an administrative sanction, it would be applied automatically everywhere in the country, an effect that an order of a provincial commission can never have (to strike a broker registered in ten provinces, it takes 10 decisions, and there is the possibility of ten challenges/appeals).  Lastly, despite their efforts to collaborate and harmonize, the twelve Canadian regulatory authorities other than the OSC are unable to make orders against the Toronto Stock Exchange, although it is the largest in the country, the third largest in North America and the eighth largest in the world. Only the OSC can do that. Obviously, a federal agency would not have that problem. By virtue of the composition of the Authority‘s board of directors, and secondarily by virtue of the Council of Ministers, representatives of other regions of the country would be involved, for the first time, in supervising that Ontario actor, and this cannot be done any other way.  To summarize, the proposed Act would allow for several things to be achieved that the provinces, jointly or severally, cannot accomplish, constitutionally. The fourth factor is plainly present.  This leaves the fifth: would the failure to include one or more provinces or localities in a legislative scheme jeopardize the successful operation of the scheme in other parts of the country?  In my opinion, that factor involves asking whether the effectiveness or viability of the proposed system requires legislation that applies uniformly across the country, as is the case for competition and trade-marks. In other words, because the capital market is now Canada-wide and integrated, if it is to be regulated in a legally viable manner, is federal legislation necessary?  In the area of securities, it is obvious that failure to have similar rules that apply to participants and transactions in some parts of the country could jeopardize the administration of the desired regime in other parts. For example, the easy mobility of some issuers enables them to migrate to a province where the system would not apply, to take advantage of less onerous provisions, such as in relation to directors‘ liability or insider trading. For some years, the provinces and commissions have recognized, through their actions, that there is a pressing need for uniform rules throughout the country, to ensure the proper operation of the Canadian capital market, and they have acted accordingly by enacting common legislation or adopting common policies on various aspects of securities, such as the harmonized legislation on the civil liability of issuers or the single passport policy. To summarize, participation by all provinces and territories is necessary to ensure the proper operation of the Canadian capital market (even though Ontario has not signed the single passport agreement, the other No.: 200-09-006746-090 PAGE: 47 authorities accept the OSC‘s receipts as equivalent to a passport issued under the policy, since they know they do not have the option of doing otherwise).  The viability of the new regime will also call for uniform application of its rules across the country.  The proposed Act adopts the opting-in formula (section 250) for all of its provisions except the provisions relating to criminal offences (section 251), production orders (section 252(1)) and whistle-blower protection (section 252(2)). Opponents and my colleagues then point out that the opting-in formula will prevent national application; in other words, the opposing provinces will refuse to opt in and will thus make it impossible to achieve the objective of uniformity of the proposed system. They concede, however, that the fifth factor would be satisfied if Parliament enacted legislation that applied everywhere in Canada, without negotiating with the provinces. The provinces could then repeal or maintain their legislation. In both cases, we would have another double aspect case: a federal law enacted under the federal power in relation to trade and commerce (91(2)) and a provincial law enacted under the power to regulate civil rights in the province (92(13)). Issuers would have to comply with both laws, and in the event of conflict the federal law would be paramount.  Their position can be summarized as follows: because the federal government is proposing to proceed by agreement with the provinces, to avoid duplication for those subject to the legislation, the fifth factor cannot be present.  With respect for my colleagues, the formula favoured for the gradual application of the proposed Act seems to me to be irrelevant to the determination of the validity of the proposed Act under section 91(2) of the Constitution Act. Whether Parliament opts for gradual, negotiated application of the federal legislation rather than unilateral application in stages is, once again, a policy choice. It is not up to the courts to use the fifth factor to review that choice.  What the opponents are actually questioning is not that a national statute alone can effectively, in legal terms, regulate the Canadian capital market (participants and transactions) as it now exists, but rather the fact that the proposed Act, if it is enacted, will possibly not have national application. The argument then comes down to the de facto degree of effectiveness of the proposed system.  From a strictly factual point of view, the case that the proposed regime is ineffective has not been made. Ontario, the province were the largest share of the Canadian market is located, in terms of issuers, intermediaries and investors,33 supports 33 48 percent of firms listed on the TSX are Ontario companies; Ontario firms represent 43 percent of the capitalization of companies listed on the TSX and TSXV; mutual funds based in Ontario represent 81 percent of shares hold in that manner; 64 percent of the others are affiliated with companies based in Ontario. No.: 200-09-006746-090 PAGE: 48 the federal initiative and is promising to transfer significant expertise to the Authority. It also seems that other provinces, including British Columbia and Saskatchewan, are in favour of a single federal agency, but are hoping for amendments to the proposed Act. In the meantime, those provinces are among the ten jurisdictions collaborating with the Transition Office. There seems to be every indication that if the bill passed by Parliament accommodated certain policy concerns, which it is not up to the courts to advise on, a large majority of the provinces would opt in.  For the provinces that are staunchly opposed to a single authority, such as Alberta and Quebec, the pressure to standardize the rules that apply to the Canadian capital market will not disappear with the advent of a federal authority with seven or eight provinces and territories opted in; quite the contrary. Refusal to opt in, for the moment, therefore does not mean that this will be the case in the medium term and that the objective stated in the preamble to the proposed Act, which can be seen in Part 15 – to have a single commission for the entire country – will not be achieved in the medium term. Rather, it is foreseeable that all provinces will voluntarily opt in, or will at least adopt provisions that are similar to the federal regime in terms of rules, responsibility and prohibitions. The result will be a uniform or nearly uniform regulatory system throughout the country, even if, in practice, in certain aspects, it is ultimately less effective than anticipated.  One thing is certain: the proposed Act cannot be constitutionally invalid because of the threatened prolonged refusal by a province or provinces to opt in. Otherwise, we would be granting a provincial right of veto over the exercise by Parliament of its powers under the second branch of section 91(2) of the Constitution Act.  I would note in passing that if a province opts in to the proposed Act, if it is enacted by Parliament, and then repeals its securities legislation and abolishes its commission, this would not constitute a delegation of power as happened in Australia, where the federal Parliament had no head of jurisdiction equivalent to 91(2); rather, it would amount to realization that the purposes of the federal law are similar, identical or superior to the purposes of the provincial law and there is no longer any reason to keep its law or its commission. Similarly, a 0.05 reduction in the blood alcohol level permitted by the Criminal Code might justify the provinces in repealing the provisions of their highway traffic laws setting a rate. There would be nothing to prevent a province from enacting a new law in future, since it is settled constitutional law that a legislature may not bind itself for all time (François Morel and Herbert Marx, Droit constitutionnel, Les Presses de l'Université de Montreal, 1982, chap. 2, section 2); issuers would then have to comply with both laws, and in the event of conflict the federal law would be paramount, as has always been the rule in double aspect cases.  Overall, I am of the opinion that the fifth factor has been proved. In the alternative, if the Supreme Court were to conclude that it has not, because of the opting- in process created, Parliament would need only to enact a law with mandatory No.: 200-09-006746-090 PAGE: 49 application across the country, with a transition period for coming into force, by region or otherwise.  Lastly, some opponents contend that this kind of legislation could not constitutionally regulate strictly intraprovincial transactions, which in fact account for only a small percentage of transactions on the Canadian capital market.  With respect, while that position is based on certain old decisions of the Privy Council, it does not reflect the law as it stands today, and it is another attempt to neutralize Parliament‘s jurisdiction under the second branch of 91(2). It is now settled law that once the analysis concludes that federal legislation is valid under the head of power relating to the general regulation of commerce, that legislation may regulate all transactions, including those characterized as intraprovincial (Caloil Inc. v. Attorney General of Canada,  S.C.R. 543; General Motors; Kirkbi). In fact, as Peter W. Hogg, Constitutional Law of Canada, 5th ed., vol. 1, writes at 20-16, that is logically the only possible conclusion from the existence of the second branch of the power under 91(2): It is important to notice that the general branch of the trade and commerce power authorizes the regulation of intraprovincial trade. Indeed, there would be no need for a general branch of trade and commerce if it did not exceed beyond interprovincial and international trade.  Similarly, see the comments by Dickson J. in General Motors, supra at 681, when he rejected the argument by counsel for Quebec that the provision on civil rights of action had to be read down to exclude intraprovincial offences (see also: Robert Leckey & Eric Ward, supra at 273).  In short, the application of the proposed Act to strictly intraprovincial proposals is a case of incidental encroachment on provincial jurisdiction in relation to local transactions, which is as valid as the encroachment by existing provincial legislation in relation to securities on the federal powers in relation to extraprovincial commerce and federal corporate law. *****  In conclusion, I am of the opinion that Parliament may validly enact the proposed Act in order to regulate all participants in the Canadian capital market, an integrated market that is critical to the country‘s economy, where transactions are essentially extraprovincial, by virtue of its power in relation to general trade and commerce (section 91(2) Constitution Act). No.: 200-09-006746-090 PAGE: 50 Comments on Parts 12 and 13  Although this was not really argued by the opponents, I questioned counsel regarding Parts 12 and 13, which create and regulate civil remedies. Part 12, ―Civil Liability‖, contains 24 sections: sections 169 to 193; the next Part, ―Civil Liability for Secondary Market Disclosure‖ contains 24: sections 194 to 219. It talks about time limits, quantum of damages, defences, appeal rights, and so on. As well, the remedies described there are not new; they already exist under provincial securities legislation (in Quebec, this type of remedy is governed by a specific statute that is harmonized with the other provinces, and not by the Civil Code34). These remedies would in fact continue to be exercised in the provincial courts and to be otherwise governed by the provincial rules of evidence and procedure and suppletive substantive law. Clearly, this deals with a civil right of action, something that, as a rule, falls within the provincial jurisdiction in relation to civil rights.  In General Motors, the new Competition Act incorporated a civil remedy in the event of violation. The new right of action, which was a necessary result of a criminal conviction, had to be exercised in the Federal Court. Section 31.1 of that Act set out a time limit, the methods for proving the criminal conviction and the quantum of damages that could be awarded. Its constitutionality was attacked, separately from the constitutionality of the Act. Dickson J., writing for the Supreme Court, said, at 648: The principal issue in this appeal is the La principale question que soulève ce constitutional validity of s. 31.1 of the pourvoi porte sur la constitutionnalité de Combines Investigation Act, R.S.C. 1970, l'art. 31.1 de la Loi relative aux enquêtes c. C-23. Section 31.1 creates a civil sur les coalitions, S.R.C. 1970, chap. C- cause of action for certain infractions of 23. L'article 31.1 établit un droit d'action the Combines Investigation Act. It is this de nature civile à l'égard de certaines fact which makes the section infractions à la Loi relative aux enquêtes constitutionally suspect: a civil cause of sur les coalitions. C'est ce fait qui jette le action is within the domain of the doute sur la constitutionnalité de l'article: provinces to create. The essential il appartient aux provinces d'établir un question raised by this appeal is whether droit d'action de nature civile. La question s. 31.1 can, nevertheless, be upheld as essentielle que soulève ce pourvoi est de constitutionally valid by virtue of its savoir si la constitutionnalité de l'art. 31.1 relationship with the Combines peut néanmoins être confirmée en raison Investigation Act. Answering this question de son rapport avec la Loi relative aux requires addressing two issues: first, is enquêtes sur les coalitions. Pour 34 Act to amend the Securities Act and other legislative provisions, S.Q. 2007, c. 15. No.: 200-09-006746-090 PAGE: 51 the Act valid under the federal trade and répondre à cela, il faut examiner deux commerce power, expressed in s. 91(2) points: premièrement, la Loi est-elle of the Constitution Act, 1867; and valide en vertu de la compétence second, is s. 31.1 integrated with the Act fédérale en matière d'échanges et de in such a way that it too is intra vires commerce qui est conférée au under s. 91(2). [emphasis added] subs. 91(2) de la Constitution Act de 1867? Deuxièmement, l'art. 31.1 est-il si intimement lié à la Loi qu'il est lui aussi constitutionnel en vertu du subs. 91(2)?  In this case, I have concluded that the proposed Act is valid by virtue of the federal jurisdiction in relation to general trade and commerce. On the second point, I am of the opinion that these two Parts are valid because the tie that is required under General Motors exists between them and the proposed regime. These parts are well designed as an integral part of the proposed regime. The remedies they create simply reinforce the prohibitions, obligations and sanctions set out in the proposed Act. They have no meaning other than in relation to the other provisions of the proposed Act and have no independent content. They allow for private actions by investors solely in the event of a violation of the law and do not create a general right of action. The encroachment by these remedial provisions on the provincial jurisdiction is minimal. Whether taken together or separately, civil, administrative or criminal remedies have a deterrent effect that operates against violation of the obligations and prohibitions set out in the proposed legislation. The two Parts allow for the actions taken by the Authority and private initiatives to be combined to encourage compliance with the law.  As well, given that these remedies stem from the relationship between investor and shareholder in the company or company directors, they comprise federal corporate law in the case of companies under federal legislation, and accordingly are valid (Multiple Access and Reference re Constitutional Validity of s. 110 of the Dominion Companies Act, supra).  I will close by noting that leaving this type of remedy to the provinces could jeopardize the effectiveness of the proposed regime and encourage forum shopping by issuers or directors who were less concerned about complying with their obligations. In fact, that is one of the reasons that prompted the provinces to harmonize their respective laws, to put similar remedies in place. The Budget Implementation Act, 2009  Sections 295 and 296 of the Budget Implementation Act, 2009, S.C. 2009, c. 2, simply allow the Minister of Finance of Canada to enter into financial arrangements and agreements with the provinces.  Section 297 enacts the Canadian Securities Regulation Regime Transition Office Act, section 3 of which establishes the Transition Office, a body that will be dissolved in No.: 200-09-006746-090 PAGE: 52 2012 or 2013 (section 17 of the Act). The Office‘s purpose is ―to assist in the establishment of a Canadian securities regulation regime and a Canadian regulatory authority‖ (section 10 of the Act). The Office‘s powers are set out in sections 11 to 13 of the Act: develop a transition plan, consult and inform. No regulatory authority is assigned to it.  In my opinion, the creation of this kind of body is simply an expression of the federal spending power, as section 295 of the Budget Implementation Act, 2009 plainly is. Section 296 merely authorizes the Minister of Finance to enter into agreements with the provinces on behalf of the Government of Canada.  The validity of sections 295, 296 and 297 of the Budget Implementation Act, 2009 does not seem to me to be in any doubt. In fact, the Attorney General of Alberta is no longer challenging it, and Quebec did not belabour the point.  Nonetheless, the majority has concluded that section 297 is invalid. That means nothing less than a declaration that the Canadian Securities Regulation Regime Transition Office Act is invalid in its entirety. Is the Transition Office now required to cease operating immediately, discharge its staff and pack its bags? Shall the Attorney General of Canada bring an emergency application in the Supreme Court of Canada for a safeguard order? Final remarks  To use an expression that is fitting here, we are not looking at a hostile takeover of a provincial head of power by the federal government, as some parties have argued; rather, this is the legal consequence of a gradual but radical transformation of the concrete reality of the capital market, a market that has become Canada-wide, integrated and vital to thousands of diverse enterprises, and is essentially characterized by interprovincial and international transactions.  With respect for my colleagues, their analysis amounts to saying that the Constitution freezes jurisdiction in relation to a subject matter of area of economic activity in time, regardless of any subsequent organic or operational evolution. In their opinion, because the courts have historically recognized the provinces‘ authority to regulate trading in securities, it follows that regulation of all aspects of the Canadian capital market by a general law cannot now be brought in by Parliament.  Permanent jurisdiction is certainly the case where the enterprise or activity is a subject matter assigned specifically and exclusively to one level of government by the Constitution Act, such as the postal service or hospitals, but not in respect of a subject matter it does not specifically address. In that case, if regulation is to be valid it must be related to a head of jurisdiction assigned to one of the levels of government in respect of the real activities of the enterprise. The broader the activities associated with a subject No.: 200-09-006746-090 PAGE: 53 matter or area of activity not specifically enumerated in the Constitution Act, the more likely it is that the possibility of a myriad of powers being in issue will arise.  The Constitution Act recognizes, in section 92(10)(a), that the operational reality of an enterprise is a critical aspect in determining the head of jurisdiction to which it is attached. For example, a local or provincial railway company is regulated by the legislature of the province concerned, while a company operating an interprovincial railway is regulated by Parliament (Montreal (City) v. Montreal Street Railway,  A.C. 333). That also means that a change in the nature of an enterprise‘s activities may result in a change in terms of its attachment to a head of jurisdiction. A local transport company whose activities broaden out over time to beyond the province‘s borders then comes under the regulation of Parliament (Ontario (Attorney General) v. Winner,  A.C. 541). However, an interprovincial and international shipping company that reorganizes its operations to focus on shipping logistics, and is under subcontract to third parties, will become not a shipping company, but a freight forwarding company, regulated by the province where its office is located (Consolidated Fastfrate Inc. v. Western Canada Council of Teamsters,  3 S.C.R. 407, 2009 SCC 53).  The same principle applies to enterprises other than those referred to in 92(10), since our constitutional law acknowledges that the transformation or reorganization of an enterprise or economic sector may result in the enterprise or sector coming under a new head of jurisdiction, in either direction. For example, the reorganization of a federal telecommunications enterprise that results in certain services, such as directory assistance, being abandoned and assigned to third parties, means that labour relations in that sector cease to be regulated by Parliament and come under provincial control. An international airport that hires employees to do cleaning and maintenance on its buildings will find that they come under the Canada Labour Code, R.S.C. 1985. c. L-2. However, if the airport management chooses to subcontract that activity sporadically, the employees assigned to it will come under the provincial labour code that applies to the workplace (Montcalm Construction Inc. v. Minimum Wage Commission,  1 S.C.R. 754). The same is true of a local maple syrup business that decides to sell its products across the country. It will then have to comply with federal rules governing signage and content of the products; in other words, its new operational circumstances will bring it under federal heads of jurisdiction that could not have applied before because of the strictly local or intraprovincial nature of its activities.  In none of the cases referred to in the preceding paragraphs was there any transfer of legislative authority between the levels of government, let alone a loss of a head of power; there was only the recognition that transformation of the company‘s operational circumstances brought it under new rules that may, as in this case, resulting double aspect cases. Obviously, that does not create any constitutional instability and does not involve any reinterpretation of the powers assigned to the two levels of government. I do not see why it would be different for the capital market. No.: 200-09-006746-090 PAGE: 54 Conclusion  To summarize, because the pith and substance of the proposed Act is the regulation of all participants in the capital market, which is an integrated, Canada-wide market characterized by essentially extraprovincial and international transactions and is critical to the financing of thousands of enterprises operating in all sectors of the Canadian economy, under the supervision of a national agency, I am of the opinion that Parliament may validly enact it by virtue of its power under section 91(2) of the Constitution Act.  For these reasons, my answer to the question submitted is ―no‖. PIERRE J. DALPHOND J.A.
"Reference by Attorney General of Alberta to Alberta"