B.C. rethinks securities regulator case

Flaherty could lose key ally in constitutional battle with provinces

The federal government is in danger of losing the clear support of a key provincial ally in its bid to have the Supreme Court of Canada rule that Ottawa has the constitutional power to establish a national securities regulator.

The British Columbia government is considering adopting a “nuanced position,” B.C. Finance Minister Colin Hansen told Maclean’s—a stance that would continue to back the federal government’s aim of creating the regulator, but oppose its constitutional arguments for doing so.

Last spring, Finance Minister Jim Flaherty tabled legislation to create a national regulator, with the goal of replacing the hodge-podge of provincial stock market regulatory bodies. Flaherty asked the court to rule that the federal government can take this step under its constitutional jurisdiction over trade and commerce.

Alberta, Quebec and Manitoba were against the plan from the outset, and Saskatchewan more recently joined their side. Flaherty had solid support from Ontario, however, and seemed also to be able to count on B.C. Having those two major provinces on-side was a crucial element in the federal strategy for pushing ahead against howls of protest, especially from Quebec and Alberta.

But only Ontario filed a so-called factum with the court by the Jan. 10  deadline for provinces to submit legal statements supporting the federal position. (Provinces opposing the Harper government have until Feb. 11 to file their factums.) That raised questions about whether B.C. was having second thoughts. Hansen discussed details in a telephone interview with Maclean’s this afternoon. An edited version of that conversation:

Q. What is your government’s position right now on the creation of a national securities regulator?

A. We continue to support the concept of a national securities regulator. We think it’s timely and a necessary move for Canada to get there. I think it’s how we get there that’s important. So our support for a national securities regulator is not without conditions.

Q. On the reference case the Supreme Court of Canada is slated to hear sometime in the spring, do you plan to file arguments with the court supporting the federal government’s position?

A. There are two issues at play here. One is the concept of a national securities regulator, which we support. The other is the broader question of the court’s interpretation of constitutional powers of the federal and provincial governments. And so we have concerns that any decision, in achieving the objective of facilitation a nation securities regulator, should not undermine provincial powers.

Q. How do you fear it might do that?

A. The federal government has responsibility over trade and commerce. Provincial governments have responsibility over property rights. We have argued in past cases that the provincial powers in a case like this would be most important. That will obviously be for the Supreme Court to decide.

Q. So does your policy aim conflict with your constitutional stance?

A. It’s not just about supporting a national securities regulator. It’s also about ensuring provincial constitutional powers aren’t eroded by the decision.

Q. So what are your options now when it comes to the court reference?

A. If our factum is in opposition to the position [the federal government] is taking, then we have until Feb. 11. If our factum is in support of the federal position, then we would have to ask leave of the court for a late filing.

Q. Well, which do you expect it will be?

A. I can’t say that at this point.

Q. But it’s possible that even though you support the federal objective you’ll be oppose them on the constitutional argument?

A. Yes. If you look at the specific wording of what the court has been asked to consider, it’s whether Parliament has the legislative authority to pass the proposed legislation. On its surface, if that was answered in the affirmative, then that would have constitutional ramifications in a broad range of cases in the future.

Q. Beyond the constitutional question, how important to you are issues like where the headquarters of the new regulator will be, where will its main offices be?

A. Anybody who thinks an organizational entity has to have all of its executive functions under one roof—if anybody feels that way—I don’t think they’re living in the twenty-first century. So when it comes to the executive functions of a national security regulator, it can be truly national in that it does not have to be centred in any one city. There’s a role for significant regional offices that can be part of that executive function.

Q. What’s your read of the mood on this issue in Vancouver’s investment community and among your current stock market regulators?

A. I think the concern is around how it might wind up being structured. I think there’s good support for the concept of a national securities regulator. But the devil is in the detail. So I think there is some anxiety that this may land with a model that is far too centred around the current Ontario Securities Commission model.

Q. You’ve said you’re still working on the position you’ll take to the court.  Should we expect it to fall clearly on one side or the other?

A. I expect it will be a nuanced position. Now, as to which side of that positive or opposition ledger it falls on, that is to be determined.

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