Canada: CSA warns Canada-U.S. cannabis companies to strictly adhere to disclosure rules

Canadian securities regulators' decision not to take action against Canadian cannabis companies with operations in the U.S. was welcomed by these companies, media reports said.

A state of uncertainty had reportedly hung over the cannabis industry since Jan 12 when the CSA said it was reviewing the policy about Canadian cannabis companies with operations in the U.S.

A fear of being delisted from Canadian exchanges prevailed among companies with U.S. operations.

But this week, when CSA released new guidance emphasizing that U.S.-exposed cannabis companies will be required to provide more in-depth and detailed information about potential risks related to their own U.S. operations and those of third-party partners, these companies were relieved that their business will not likely be affected.

“We’ve got deals that are back on after two-and-a-half weeks. Everybody has been sitting on the sidelines, and now it’s go, go, go again,”  Eric Foster, a partner at Dentons Canada LLP, who leads the law firm’s cannabis group was reported to state.

“Effectively what it says is it’s business as usual. They’ve said these are companies that are allowed to list in Canada, individual exchanges can make their own decisions as to whether to list these entities. Really it just increased the disclosure,” he added.

Companies that don’t comply with the enhanced disclosure rules  could ace punishment, warned CSA.

“We view this development positively for Canadian-listed companies with U.S. operations, as it significantly reduces their risk profile, and may be the spark investors need to take advantage of attractive valuation opportunities,” Russell Stanley, an analyst with Echelon Wealth Partners, wrote in a note to clients.

“Today’s ruling is really just a reconfirmation of their earlier view. It’s extremely positive not just for Canadian companies like CannaRoyalty that have U.S. assets, but it’s quite positive for the Cannabis sector as a whole,”  Marc Lustig, CEO of Ottawa-based CannaRoyalty Corp., which operates in California, Washington and Arizona was reported to state.

(Reporting by Asha Bajaj)