OTTAWA _ The federal government has set off a constitutional battle with at least two provinces by introducing legislation for the creation of a national securities regulator with enhanced policing powers over stock fraud across the country.
Quebec and Alberta reacted angrily within minutes of Ottawa’s noon-hour announcement Wednesday, telling the federal government to butt out of what they insist is provincial jurisdiction.
On Parliament Hill, Bloc Quebecois Leader Gillles Duceppe blasted Tory MPs from Quebec as “nothing else than carpets.”
The acrimony sets up three court fights. Quebec and Alberta have already launched challenges in their provincial courts of appeal, while federal Finance Minister Jim Flaherty said he is sending his draft bill to the Supreme Court of Canada for a ruling on whether Ottawa has jurisdiction.
The Supreme Court reference is expected to take some time _between 10 months and a year _ but Flaherty said he is confident of victory.
“We expect the court will rule that Parliament…has the authority to do this,” he said. “Legal opinions going back decades are uniform in the conclusion that, without exception, the federal Parliament has jurisdiction to legislate in this area.”
Although Flaherty has made great strides in bringing many provinces on board _ given that four years ago Ontario appeared to be his only committed ally _ there appears to have been no softening in the positions in Quebec and Alberta.
Their reaction Wednesday was swift and combative.
“We will defend our jurisdictions with plenty of vigour,” Quebec Premier Jean Charest told reporters in Quebec City.
“We will keep up the fight in the legal arena. We will keep up the fight in the political arena. We will keep up the fight in the economic arena,” his finance minister, Raymond Bachand, said in the provincial legislature.
Alberta Finance Minister Ted Morton called the federal move an “unprecedented power grab” and totally without justification.
“The passport system of securities regulation already accomplishes all that a federal regulator purports to do,” he said in a statement.
“It provides a single window of access to Canada’s capital markets, just as a federal regulator would, by allowing market participants who file in one province a passport to operate in all participating provinces.”
He noted that the Organization for Economic Co-operation and Development and the World Bank Group have consistently ranked Canada’s financial system as among the world’s best.
Manitoba has also voiced opposition to the concept, although it has not launched any court challenges. Meanwhile, British Columbia said Wednesday it is onside only if provincial jurisdiction is respected.
The reaction from the business and financial institutions was virtually unanimous in support.
It is unclear what would occur if the Supreme Court were to give Ottawa the green light and a national regulator is established with the participation of only seven of the 10 provinces, plus the territories.
The minister suggested the current passport system, in which regulatory approvals in one province are recognized by others, would cease to exist once the national office is in place, leaving opt-out provinces isolated.
“We are going to function with one Canadian securities regulator,” he told reporters. “There won’t be a continuance of provincial or territorial securities commissions in those provinces and territories that are participating.”
Analysts said Ottawa needs to take a tough stand against the passport system because otherwise there would be little incentive for provinces to join the national system.
Flaherty insisted he is not pressuring reluctant provinces to opt in to the new body, saying the system would be completely voluntary. But he said he hoped all would join.
Just the act of tabling draft legislation is as close to the creation of a national regulator as Canada has got since the idea was first proposed in 1935.
For Flaherty, it has been an arduous and determined battle. It has included intense negotiations, some arm-twisting, the appointment of an expert panel that recommended a national presence be established, and the naming of a transition office to draft a bill.
It has not been all futile. At least two provinces once hostile to the idea _ B.C. and Saskatchewan _ now generally endorse it. And most other provinces and territories appear ready to go along.
Still, the earliest it could come to fruition is likely late 2012 or 2013.
The new Crown corporation, called the Canadian Securities Transition Office, would replace the Ontario Securities Commission, which regulates trading on the Toronto Stock Exchange.
But Flaherty noted that the new body would have strong regional offices. The plan is for all current provincial and territorial commissions to be converted into branch offices, and that all current staff would retain their jobs.
The new body, however, would operate under one set of rules and policies, not 13. In theory at least, it would be more efficient and effective in regulating financial markets and investment, and more vigorous in investigating and prosecuting abuses and fraud.
The new act would give police expanded powers to probe insider trading and would be able to compel market players to supply information on suspicious trades. Regulators would also have greater ability to scrutinize such complex investment instruments as derivatives and hedge funds.
“Canadians who rely on capital markets for their saving and retirement plans deserve the protection of strong regulation that reaches all parts of the country,” Flaherty said.
The finance minister added that Canada has got a black eye internationally for toothless enforcement of stock fraud, which he blamed on the existence of 13 securities commissions, each with its own rules and investigatory approaches.