This review follows significant interest by reporting issuers
and investors in the medial marijuana industry, with the CSA noting
that a substantial number of issuers (a majority being in the
junior mining industry) announced their intention to explore
opportunities in the industry after the introduction of federal
regulations effective April 1, 2014, to govern the production,
distribution and use of medical marijuana in Canada.
Generally, CSA staff found that disclosure lacked clear
discussion of: (i) the issuer's stage of entry into the medical
marijuana industry; (ii) the time and financial resources required
to effect the change in business; (iii) the medical marijuana
licensing requirements of Health Canada; and (iv) approvals
required by the board of directors or shareholders of the issuer or
of the issuer's securities exchange.
Furthermore, the CSA found that disclosure also failed to
acknowledge that: (i) issuers will not be able to grow or sell
medical marijuana without a Health Canada license; (ii) a facility
meeting the licensing requirements of Health Canada must be
available for inspection by Health Canada before a license will be
granted; and (iii) there is no assurance that any prospective
project will be successfully initiated or completed.
Of particular interest, the report provided an example of
deficient disclosure, along an enhanced example. The CSA encouraged
issuers considering a change in their primary business, even those
unrelated to the medical marijuana industry, to use the guidance as
a tool to ensure factual and balanced disclosure in the
announcement. For further information, see CSA Staff Notice 51-342.
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