Friday, May 28, 2010

History of the BNA Act: is a national securities regulator constitutional?

Today "Is X constitutional?" usually means someone will attempt to predict "Will a Supreme Court majority allow it?" But I'm trying to think more of constitutional principles here.

I've seen a lot of coverage as to who might win in the federal government's campaign to create a national regulator of securities trading, but not much discussion of where, given that "regulation of securities trading" is not explicitly enumerated in the BNA Act itself, this power ought in principle to be allocated. Policy Options, the public-policy mag of the Institute for Research on Public Policy, has just published a special issue on current federal-provincial issues, and they don't seem to touch this matter at all. [Not that I actually follow the latest research on the constitutional implications of securities trading -- suggestions welcome.]

I must say the actual text of the BNA Act looks good for the federal side. The feds got, not only "regulation of trade and commerce," but also "banking, incorporation of banks, and the issue of paper money," "bills of exchange and promissory notes," "interest," "the public debt and property," and pretty much everything related to finance, banking, and exchange. The provinces' most relevant powers, "the incorporation of companies with provincial objects" and "property and civil rights in the province," don't sound much like what securities regulation is. Even the provinces' residual power -- "generally all matters of a merely local or private nature" -- doesn't sound very close to the securities business.

Add to that the line of interpretation that has it that the bright line in the division of powers was an agreement that things that touch on local cultural/emotional/communal sensibilities should be on the provincial side, while things related to creating a larger economic unit should be Ottawa's.

Sounds like a good textual basis for securities regulation being more like the things given to the national government than the things given to the provinces.

T'other hand, the constitution is a living tree. It evolves. We have had roughly 150 years of constitutional evolution, and today both Ottawa and the provinces do lots of things they might not have been expected to do (Ottawa does culture, does health funding, funds education? Yes, bigtime. The provinces have quasi-diplomatic agencies overseas, collect their own income taxes, regulate securities? Yup.) National questions, emotional as they may be have clearly become a federal priority. And the provinces have long been much more sovereign within their own fields than the black letter of disallowance would seem to suggest. Still, it's difficult to see a constitutional principle upon which the provinces found their control of securities trading, except they have been doing it quite a while.

Ottawa's new legislative proposal, meanwhile, seem mostly to fudge the issue. They propose a national securities regulator -- unless any province wants to have a provincial one. Is there a principled view there of how powers should be divided? Andrew Smith, for one, is disgusted.
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