The Quebec Court of Appeal has found the Canadian government's second attempt at creating a national capital markets regulator to be unconstitutional in its decision in Renvoi relatif à la réglementation pancanadienne des valeurs mobilières. The Supreme Court of Canada found the federal government's previous attempt at a national capital markets regulator to be unconstitutional in a 2011 decision, holding it was not a valid exercise of the federal government's power to regulate trade and commerce.

The new proposal would create a Capital Markets Regulatory Authority ("CMRA"), and was developed cooperatively by the federal government, five provinces and one territory. The new scheme would allow provinces to opt-in to the CMRA, unlike the previous scheme, which the federal government attempted to impose on the provinces. Under the proposed legislation, each province that opted-in would enact the same legislation (the "Uniform Act"). The scheme provided that the Uniform Act could only be amended cooperatively, such that one government could not unilaterally amend their version of the Uniform Act, and if a threshold of other governments agreed to an amendment, all the governments that had opted-in would be required to adopt the same amendment. The scheme also delegated the administration of the CMRA to a council of ministers.

The Quebec Court of Appeal found the scheme to be unconstitutional for two primary reasons. First, it found the amending scheme to be an impermissible delegation of provincial legislative power to the council of ministers, and it was also an impermissible fetter on parliamentary sovereignty. Second, the Court found the regulatory role given to the council of ministers would effectively give provinces a veto over the federal government's ability to address systemic risk.

The Court held that on its own, the CMSA would be constitutional to address systemic risk, with some caveats. However, the Court's findings on the implementation and oversight mechanism make this holding somewhat hollow.

Ultimately this issue will likely be determined by the Supreme Court of Canada, so the saga of the national securities regulator is far from over. It will be notable whether the federal government amends the proposed scheme in advance of that appeal. In any case, while the decision was not favourable for the proposed scheme, the Quebec Court of Appeal decision does signal a small victory for cooperative federalism, and confirms that courts will uphold at least some aspects of a national regulator following the Supreme Court's statements in its 2011 decision.