Public companies entering Canada’s fledgling medical marijuana market are failing to disclose a series of business risks and are creating ‘serious investor protection concerns’, according to a study released by the Canadian Securities Administrators (CSA).
The regulatory body says at least 25 reporting issuers seeking to gain a foothold in the Canadian medical marijuana sector have failed to warn investors of strict Health Canada licensing requirements. They have also failed to clearly inform investors that they will not be able to sell marijuana without a license and they have not discussed with investors the stage the firms are at in their entry into the field.
The CSA further says the companies have not outlined the costs and timelines of entry to the medical marijuana field in their communications with investors and have not revealed what approvals they may need for their business proposals.
The CSA does not name the 25 companies it accuses of inadequate risk disclosure, but says it has sent comments to all companies seeking to enter the field, asking for clarifying disclosure documents from 92 percent of them.
‘Overall, the review found unbalanced and promotional disclosure that often promoted the benefits, but failed to outline the risks involved,’ says Bill Rice, chairman of the CSA and CEO of the Alberta Securities Commission, in a CSA press release. ‘The level of deficiency in issuers’ disclosure is unacceptable as investors need comprehensive, balanced information to understand the business changes being proposed by these issuers.’
The CSA’s review is meant to ascertain whether the reporting issuers are ‘providing sufficient and balanced disclosure on their intent to enter the medical marijuana field,’ the association says, adding that it will continue to monitor communications to investors from these companies.
