MONTREAL - The Quebec Court of Appeal ruled Thursday that a proposed federal law to set up a national securities watchdog is unconstitutional.

The court said in a split decision the federal government exceeded its legislative jurisdiction with the project.

Chief Justice Michel Robert noted in the judgment that "for a very long period of time, the regulation of trading in securities has been subject to the provincial jurisdiction in respect to property and civil rights in the province."

The court pointed out that provincial jurisdiction in securities regulation has been recognized repeatedly for the last 80 years by various bodies, including the Supreme Court of Canada.

It also said the interprovincial and international dimension of the securities market as suggested by the federal government "changes nothing."

As well, the ruling added the provinces have demonstrated their expertise in the regulating the industry.

The justices also said the proposed law appears to be contradictory because it allows provinces to opt out. They also noted that some of the provisions are already under federal jurisdiction in the Criminal Code.

"The proposed act does not constitute a valid exercise of the general trade and commerce power," the court wrote in its decision.

The Alberta Court of Appeal reached a similar conclusion at the beginning of March.

The Quebec decision was not unanimous. Justice Pierre Dalphond accepted the federal government's arguments.

The Supreme Court will weigh in on the matter in mid-April at the request of Finance Minister Jim Flaherty.

Six provinces say in a petition to the high court they are opposed to the creation of a federal securities regulator.

Besides Quebec, provincial governments in Alberta, Manitoba, Saskatchewan, British Columbia and New Brunswick have all distanced themselves from the federal effort, which Ontario has supported.

Quebec Finance Minister Raymond Bachand reacted cautiously to the appeal court's decision, saying he was pleased to see the court recognized the merits of the provincial government's case.

"The fact that appeals courts in Quebec and Alberta have found that the federal government lacked authority under the Canadian Constitution to regulate securities is eloquent proof that Quebec's claims have a basis," he said.

He asked the federal government to "abandon its plans to encroach on provincial jurisdiction over securities."

Note to readers: This is a corrected version. A previous story said the Supreme Court would weigh in on April 12