The Quebec Court of Appeals recently held in an advisory opinion that Canada’s attempt to create a national securities regulation scheme with the voluntary participation of the provinces is unconstitutional. Canada’s Constitution Act of 1867 grants provinces exclusive authority to regulate securities within their provincial lines. In 2011, the Supreme Court of Canada struck down the Canadian Securities Act, which attempted to establish a central regulation scheme on the basis that the Constitution granted securities regulation power to the provinces.

In an effort to get around the limitation on the federal government to regulate securities, the parliament devised the Capital Markets Stability Act (CMSA), which creates a voluntary system where the provinces consent to federal regulation. Most of the provinces have signed on to the uniform approach, but to no one’s surprise, Quebec has refused to participate. In its advisory opinion, four out of five judges for the Quebec Court of Appeals agreed that the federal scheme infringes on the sovereignty of the provinces.

The CMSA will likely be enacted. If so, expect the Supreme Court of Canada to settle the score once again.