Executive Agreements

• Author: International Law Group

In 1988, the British Columbia Securities Commission (BCSC) along with the Provinces of Ontario and Quebec, signed a Memorandum of Understanding with the Securities Exchange Commission of the United States (SEC). Each party contracted to furnish the "fullest mutual assistance" to the other, such as obtaining documents and taking testimony when the other signatory requests it.

At about the same time, British Columbia implemented the MOU by amending its Securities Act, inter alia, with the addition of Section 141(1)(b). This Section authorizes the BCSC's executive director to order a registered securities dealer in the Province to produce records "to assist in the administration of the securities laws of another jurisdiction."

The BCSC issued an order under Section 141(1)(b) against Global Securities Corporation, a B.C. securities broker (GSC), to carry out a request from the SEC. The latter was looking into possible violations of U.S. law by GSC and/or its employees. This investigation focused on one Tracy-Anne Godoy, who was at the time a GSC employee. The order requested all records relating to Ms. Godoy, as well as all records generally relating to the registrant's trading activities in the United States. GSC turned over only that part of the ordered material that dealt with Ms. Godoy. The BCSC then served GSC with a hearing notice under Section 161(1) of the Act to find out whether it was in the public interest to compel GSC to fully comply with the production order.

GSC next went to the British Columbia Supreme Court and asked for a declaration that Section 141(1)(b) was ultra vires the province. That Court dismissed the petition as without merit. In a split decision, the Court of Appeal reversed the dismissal. Upon review, the Supreme Court of Canada allows the appeal, ruling that Section 141(1)(b) of the Securities Act is intra vires the province. As a general proposition of Canadian federalism, the Court explains, provincial legislation is constitutional if its "pith and substance" or dominant characteristic falls within the constitutional powers of the enacting legislature. The effects of the legislation (other than incidental ones) may have probative value on the pith and substance issue. Both sides had submitted evidence by affidavit on the true object and purpose of Section 141 and the trial court acted properly in taking them into account.

The controlling purpose of Section 141(1)(b) is to advance the enforcement of the British...