Canadian Securities Regulators Publish Guidance on Cannabis Issuer Disclosure

On October 10, 2018, the Canadian Securities Administrators (CSA) published Staff Notice 51-357 Staff Review of Reporting Issuers in the Cannabis Industry (the Staff Notice) following a review of 70 reporting issuers with cannabis operations.

The Staff Notice identifies the following key areas where the CSA expects reporting issuers to improve their disclosure:

  • Licensed producers (LPs) generally did not provide sufficient information in their financial statements and management’s discussion and analysis for an investor to understand their financial performance. All of the LPs reviewed by CSA staff needed to improve their fair value and fair value related disclosures under International Financial Reporting Standards.

  • Some issuers did not consistently comply with requirements for forward-looking information, guidance for providing balanced disclosure and certain other requirements.

  • Nearly three quarters of issuers with cannabis operations in the United States did not satisfy the disclosure expectations set out in CSA Staff Notice 51-352 (Revised) Issuers with U.S. Marijuana-Related Activities.

Reporting issuers with cannabis operations are encouraged to use the Staff Notice as a guide to make improvements in their disclosure.

The CSA said it plans to continue to monitor the cannabis industry moving forward. Issuers who don’t provide appropriate disclosure may be subject to regulatory action.

The Staff Notice can be viewed here.

DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.