On October 16, 2017, the TMX Group and the CSA published staff notices that impact issuers with U.S. marijuana-related activities. 

Canadian Securities Administrators

CSA Staff Notice 51-352 notes that there is a conflict between U.S. state and federal law related to marijuana with certain states permitting its use and sale within a regulatory framework, notwithstanding that marijuana continues to be listed as a controlled substance under U.S. federal law. As such, marijuana related practices or activities, including the cultivation, possession or distribution of marijuana, are illegal under U.S. federal law. The CSA outlines certain disclosure expectations for issuers that currently have, or are in the process of developing, marijuana-related activities in U.S. states where such activity has been authorized within a state regulatory framework.

The disclosure expectations for issuers with U.S. marijuana related activities are that issuers should:

  • describe the nature of the issuer’s involvement in the U.S. marijuana industry;
  • explain that marijuana remains illegal under U.S. federal law and that the approach to enforcement of U.S. federal laws against marijuana is subject to change, and discuss the risks, including the risk of adverse enforcement action;
  • state whether and how the issuer’s marijuana-related activities are conducted in a manner consistent with any U.S. federal enforcement priorities; and
  • discuss their ability to access both public and private capital and indicate what financing options are/are not available in order to support continuing operations.

There are separate disclosure expectations for other issuers involved directly and indirectly in cultivation and distribution, and those with ancillary involvement.

TMX Group

The TMX Group Staff Notice also notes that it is illegal under U.S. federal law to cultivate, distribute or possess marijuana in the United States. Furthermore, financial transactions involving proceeds generated by, or intended to promote, marijuana-related business activities in the U.S. may form the basis for prosecution under applicable U.S. federal money laundering legislation.

Accordingly, the TSX is of the view that issuers with ongoing business activities that violate U.S. federal law regarding marijuana are not complying with certain sections of the TSX Company Manual. Such business activities may include: (i) direct or indirect ownership of, or investment in, marijuana-related businesses; (ii) commercial interests or arrangements with marijuana-related businesses that are similar in substance to ownership of, or investment in, marijuana-related businesses; (iii) providing services or products that are specifically designed for, or targeted at, marijuana-related businesses; or (iv) commercial interests or arrangements with entities engaging in the business activities described in (iii). In light of its  position, the TSX will be conducting a review of affected listed issuers. Be Mindful of Local Exemptions and Requirements