Canada: Update On Cannabis Legalization: Recent Guidance From The Alberta Government, Toronto Stock Exchange And Canadian Securities Administrators

Last Updated: November 29 2017
Article by Emily McDermott and Riley O'Brien


Earlier this year, we reported in a BD&P Start-Up and Early-Stage Companies Newsletter that Bill C-45, was introduced in the House of Commons, providing long-anticipated insight into the direction that the legal framework for recreational marijuana in Canada is headed. In that article, we advised that Bill C-45 defers to the provinces to enact laws relating to distribution and retail. In October and November 2017, there were a number of regulatory and legal developments related to the production, distribution and retail sale of cannabis, including:

  • Announcements from British Columbia, Alberta and Ontario regarding their proposed provincial consumer cannabis frameworks;
  • A notice from the Toronto Stock Exchange (TSX) regarding issuers with U.S. marijuana-related activities; and
  • A notice from the Canadian Securities Administrators (CSA) regarding disclosure expectations for issuers with marijuana-related activities.

Federal Excise Tax—1 gram, 1 dollar

On November 10, 2017, Bill Blair, the Canadian federal government's lead on the legalization of cannabis, announced the federal government's tax proposal for cannabis and called for feedback by December 7, 2017. The proposal calls for an excise tax of $1 per gram of cannabis or 10% of the final retail price, whichever is higher. The proposed tax would be split 50/50 between the federal government and the provinces and territories. The CBC reports that if the provinces adopt the federal government's proposal without imposing their own cannabis tax, this would translate into an $8 gram of cannabis costing $10.17 in Ontario and $9.45 in Alberta (including GST/HST which is proposed to be charged on the after excise tax dollar amount).

Bill Blair says that the tax could generate another $1 billion in tax revenue which would be split 50/50 with the provinces and territories.1 However, certain provinces have expressed discontent with the 50/50 proposal, citing their increased costs related to regulation and enforcement compared to Ottawa. Alberta's Finance Minister, Joe Ceci, has called the proposal"completely unacceptable"and called for the federalgovernment to work out an alternative with theprovinces.2

Proposed Provincial Frameworks—Government Monopoliesand Fence Sitters


Alberta recently released its proposed "Alberta Cannabis Framework". The Framework provides guidanceon the Alberta government's approach to regulating cannabis and outlinesthefollowing key objectives:

  • Keep cannabis out of the hands ofchildren;
  • Protect public health;
  • Promote safety on roads, in workplaces, and in publicspaces; and
  • Limit the illegal market forcannabis.

On November 16, 2017, Alberta's NDP government introduced Bill 26:An Act to Control and RegulateCannabis. Bill 26will enact parts of the Framework—largely through amendments to Alberta'sGaming and Liquor Act.Overall, Bill 26 will:

  • Allow Alberta consumersover the age of 18 to possess up to 30 grams of cannabis in apublicplace;
  • Authorize the Alberta Gaming and Liquor Commission(AGLC)to carry out oversight and compliancefunctions regardingthe saleand distribution of cannabis;
  • Establish the AGLC's authority to carry out public online sales and tolicense privately ownedand operated cannabis stores; and
  • Establishprovincial offences related to youthpossession, public consumptionand consumption invehicles.

Under the regulatory regime proposed in Bill 26, Albertaconsumers overtheage of 18 will be abletopurchase cannabis in stand-alone retail stores separate from the sale of alcohol. Retail locations willrequirelicensing similarto Alberta's current liquor regime and will receive their product fromgovernment regulated distributors. The public consumption of cannabis will be regulated similarly to tobacco.


Ontario has introduced itsOntario Cannabis Act,which outlines the province'sapproach to thelegalization of cannabis. Underthis legislation, Ontarioconsumers overthe ageof 19 would be able to purchase cannabis from government operated retailstores with onlinedistribution expected to beavailable by July 2018. Asubsidiary of the Liquor Control Board of Ontario will oversee the sale anddistribution of cannabisinstand-alone retailstores separate fromthe sale ofalcohol.The recreationalconsumption of cannabis willonly be permitted in privateresidences and not in public places, workplaces, or motorized vehicles. Medical consumption of cannabis will be subject to the same rules as tobacco.

The Ontario government expects to have 40 retail locations open by July 2018, 80 retail locations open by July 2019 and 150 retail locations open by 2020.

British Columbia

British Columbia has not yet released a proposed cannabis regulatory framework. British Columbia has, however, conducted a stakeholder engagement process under which the public was invited to make submissions until November 1, 2017. British Columbia's Public Safety Minister Mike Farnworth has said that British Columbia may not take a "one-size fits all approach" considering that Vancouver and Victoria already have by-laws in place to licence and regulate medical marijuana dispensaries.3 The City of Vancouver has specifically requested a mix of private and government run stores—similar to British Columbia's current liquor regime. Meanwhile, the mayor of Victoria has expressed support for privately run retail stores, emphasizing the craft beer industry which has developed in British Columbia as a model to aspire to for the cannabis industry.

TSX Staff Notice – Warns of Potential Delisting for Issuers Engaged in Marijuana-related Activities in the U.S.

On October 16, 2017, the TSX issued Staff Notice 2017-0009 providing guidance to issuers engaged in marijuana-related activities in the U.S. about the application of certain requirements under the TSX Company Manual (Requirements). Under the Requirements, the business of TSX applicants or listed issuers must be conducted with integrity and in the best interests of the issuer's security holders and the investing public and in compliance with the rules and regulations of TSX and all other regulatory bodies having jurisdiction.

While marijuana is now legal in several U.S. states, it remains illegal under U.S. federal law to cultivate, distribute or possess marijuana. As a result, the TSX warns that it may exercise its discretion to initiate a delisting review of issuers engaged in marijuana-related business activities in the U.S., including issuers:

  • With ownership or commercial interests in entities engaged in cultivating, distributing or possessing marijuana in the U.S.; and
  • Providing products or services designed for or targeted to marijuana-related entities or having a commercial interest in such business activities.

The TSX advises that it will start reviewing the marijuana-related activities of issuers conducting business in the U.S. by the end of 2017 and warns that issuers violating U.S. federal law may be delisted.

CSA Staff Notice – Outlines Disclosure Expectations for Issuers with Marijuana-related Activities in the U.S.

On October 16, 2017, the CSA issued a staff notice outlining the CSA's specific disclosure expectations for issuers that have, or are developing, marijuana-related activities in the U.S. The CSA notes that its expectations are premised on the assumption that marijuana-related activities undertaken by issuers are conducted in compliance with U.S. laws and regulations of the states where such activities are legal. CSA's expectations are also premised on the understanding that the U.S. federal government currently takes a forbearance approach (currently articulated by non-legally binding guidance and statements from federal authorities) to enforcing federal laws in this sector.

In the Staff Notice, the CSA outlines the following disclosure expectations for issuers with marijuana-related activities in the U.S.:

All Issuers with U.S. Marijuana Related Activities Must:

  • Describe the nature of the issuer's involvement in the U.S. marijuana industry and include the disclosures indicated for at least one of the direct, indirect and ancillary industry involvement types provided below;
  • Explain that marijuana remains illegal under U.S. federal law, explain that the approach to enforcement of U.S. federal laws against marijuana is subject to change and discuss the resultant risks, including the risk of adverse enforcement action;
  • State whether the issuer's U.S. marijuana-related activities are conducted in a manner consistent with any U.S. federal enforcement priorities;
  • Discuss the issuer's ability to access both public and private capital and indicate what financing options are / are not available in order to support continuing operations given the illegality of marijuana under U.S. federal law;

Issuers with Direct Involvement in Cultivation or Distribution Must:

  • Outline the regulations for U.S. states in which the issuer operates and confirm how the issuer complies with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. state;
  • Discuss the issuer's program for monitoring compliance with U.S. state law on an ongoing basis and outline internal compliance procedures, disclose any material non-compliance as well as material citations or notices of violation;

Issuers with Indirect Involvement in Cultivation or Distribution Must:

  • Outline the regulations for U.S. states in which the issuer's investee(s) operate;
  • Provide reasonable assurance, through either positive or negative statements, that the investee's business is in compliance with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. state; and

Issuers with Material Ancillary Involvement Must:

  • Provide reasonable assurance, through either positive or negative statements, that the applicable customer's or investee's business is in compliance with applicable licensing requirements and the regulatory framework enacted by the applicable U.S. state.

The Staff Notice warns that failure to comply with the above disclosure may trigger regulatory action, including: receipt refusal in the case of prospectus offerings, requests for restatements of non-compliant filings and referrals for appropriate enforcement action.


We will continue to follow and report on Canada's transition towards legalization of recreational cannabis and share legal and regulatory developments as they become available.





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