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Canadian securities regulator sets disclosure rules for cannabis companies

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Canadian securities regulator sets disclosure rules for cannabis companies

The Canadian Securities Administrators have asked marijuana companies with investments in the U.S. to disclose the risks associated with their activities to investors.

According to the umbrella organization for Canada's provincial and territorial securities regulators, issuers with marijuana-related activities in the U.S. assume certain risks as the use and sale of marijuana remains illegal under federal law even though it has been authorized by some states.

The group believes the federal law relating to marijuana could be enforced at any time, putting issuers with U.S. marijuana-related activities at risk of being prosecuted and having their assets seized.

The Canadian Securities Administrators expect the companies to address the current legal and regulatory environment in their disclosures, including any risks that would result from changes in the approach to enforcement of U.S. federal law.

However, the group noted that it would re-examine its views if the U.S. federal government's forbearance-based enforcement approach were to change. It also stated that different exchanges may make their own judgments in the application of their listing requirements and an independent assessment of compliance and risk analysis.

Richard Carleton, CEO of the Canadian Securities Exchange, said: "This document provides significant comfort to these issuers that their Canadian listings will remain in good standing as long as they provide the disclosure that is rightly required by regulators."

Meanwhile, TMX Group Ltd. has stated that it might delist some cannabis-related companies which have operations or affiliations in the U.S., Reuters reported Oct. 17.

The Toronto Stock Exchange operator will start reviewing such companies by the end of 2017 in order to find out if their operations violate any listing standards.