Canadian regulators warn on medical marijuana disclosures

Mon Feb 23, 2015 11:34am EST
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TORONTO Feb 23 (Reuters) - Companies rushing to enter Canada's fledgling medical marijuana sector have not adequately disclosed potential business risks to investors, Canadian securities regulators said on Monday.

A review by the umbrella Canadian Securities Administrators (CSA) group found "unbalanced and promotional disclosure that often promoted the benefits, but failed to outline the risks involved," CSA head Bill Rice said.

The CSA group, which includes regulators from Canada's 10 provinces and three territories, said its review found a lack of consistent and clear disclosure about the risks, cost and time required before an issuer can begin licensed operations.

It also said disclosures by medical marijuana companies often have not discussed the many barriers and obligations involved in entering the industry.

Nationwide regulations govern medical marijuana in Canada, while in the United States marijuana is illegal at the federal level. This distinction has made the nascent Canadian sector attractive to both Canadian and foreign investors and has prompted a slew of listings in the past year.

They include: T-Bird Pharma Inc, Tweed Marijuana Inc , OrganiGram Holdings Inc, Bedrocan Cannabis Corp , Aphria Inc and PharmaCan Capital.

The CSA did not identify the companies that were involved in its review, but said it has sent comment letters to all issuers in the scope of its review and asked 92 percent of them to file clarifying disclosure documents, which they have done.

The CSA said it found serious investor protection concerns at 25 reporting issuers. It said that these issuers were generally at a preliminary stage of entry into the sector. (Reporting by Euan Rocha; Editing by Peter Galloway)