Canadian CANNAINVESTOR Magazine November 2017 - Page 243


The CSA Staff Notice requires that U.S.-Related Cannabis Issuers ensure that they meet the CSA’s disclosure expectations (described below) and evaluate, monitor, and reassess any related risks on an ongoing basis. Issuer disclosure is expected to be provided in prospectus filings and other required documents, such as their Annual Information Form and Management’s Discussion and Analysis.

All Issuers with U.S. Cannabis Related Activities must:

- Explain that cannabis remains illegal under federal U.S. laws and that the approach to enforcement of U.S. federal laws is subject to change. The resultant risks, including the risk of adverse enforcement action, must be discussed;

- State whether and how their activities are conducted in a manner consistent with any U.S. federal enforcement priorities; and

- Discuss their ability to access both public and private capital, and indicate whether financing options are available in order to support continuing operations, given the illegality of cannabis under U.S. federal law.

Issuers with direct involvement in U.S. cannabis cultivation or distribution must:

- Outline the regulations in the U.S. States in which they operate, and confirm how they are complying with applicable licensing requirements and the regulatory framework enacted by the applicable State; and

- Discuss their program for monitoring compliance with U.S. State law on an ongoing basis and outline internal compliance procedures. Further, they must disclose any material non-compliance as well as material citations or notices of violation.

Issuers with indirect involvement in cultivation or distribution must:

- Outline regulations in the U.S. States in which their investee(s) operate;

- Provide reasonable assurance that the investee’s business is in compliance with the applicable licensing requirements and regulatory framework enacted by the applicable U.S. state. (A similar requirement also applies to issuers with material ancillary involvement in the U.S. cannabis sector, as defined by the CSA.)

Any issuer that fails to provide appropriate disclosure may be subject to regulatory action. In the event that the U.S. federal government changes its approach to enforcement of the cannabis industry, CSA staff will re-examine the views outlined in their recently released staff notice.