skip to main content




Back to all publications
Oct 26, 2017

TSX, TSX-V and CSA Clarify Their Positions on Listed Entities with Ties to U.S. Marijuana Market

By Richard M. Kimel and Tyler Brent

On October 16, 2017, the Toronto Stock Exchange (“TSX”), the TSX Venture Exchange (together with the TSX, the “Exchanges”) and the Canadian Securities Administrators (the “CSA”) released separate guidance clarifying their positions on the regulation of entities with ties to the U.S. marijuana market.

The Exchanges released identical notices confirming that listed entities are not permitted to engage in the U.S. marijuana market. The Exchanges have always required applicants and listed entities to comply with all laws, rules and regulations applicable to their businesses. The Exchanges’ bulletins reminded that, despite the “Cole Memorandum,” marijuana remains a Schedule I drug, prohibited by the U.S. federal Controlled Substances Act. Therefore, entities that cultivate, distribute or possess marijuana in the U.S. (“Subject Entities”) are considered by the Exchanges to be engaging in illegal activity in contravention of the Exchanges’ policies. Further, the Exchanges suggested that financial transactions involving U.S. marijuana businesses may contravene U.S. money laundering rules. Non-compliance with the Exchanges’ requirements could lead to a delisting. Those following the space should not be surprised with this news, given that it is simply a formalization of the Exchanges’ recent informal positions.

The Exchanges also warned that entities that own Subject Entities either directly, indirectly or in substance are considered to be engaged in the business of U.S. marijuana, and therefore at risk of delisting. Similarly, entities that target Subject Entities with their products or services, or have commercial arrangements with such entities, may also be considered to be in breach of the listing requirements.

The Exchanges announced that they expect to complete reviews of all of their listed entities by the end of the year. The Exchanges expect listed entities to take steps to ensure they are in compliance with their rules, meaning that some companies may need to divest certain U.S. interests or transfer their listing to other exchanges.

The Exchanges’ approach comes in contrast to the CSA requirements, which were clarified by Staff Notice 51-352 (the “Staff Notice”). The CSA considers securities regulation to be primarily disclosure-based. Accordingly, the Staff Notice focused on disclosure requirements for listed entities, which require each entity’s disclosure fairly presents all material facts and risks. The Staff Notice emphasized that the CSA’s disclosure-based approach is premised on the entity complying with U.S. laws at the state level.

The CSA recognized that there is uncertainty associated with operating in the U.S. marijuana industry because the federal government’s policy towards non-enforcement of the federal prohibition (i.e. the “Cole Memorandum”) could change at any time. However, the CSA considered this to be largely a business risk, and barring public interest concerns, not a securities law violation provided adequate disclosure is made to investors. Specific disclosure recommendations were included in the Staff Notice as replicated here in Table 1.

Table_Cannabis Newsletter

Cannabis companies applying to be or already listed on the Canadian Securities Exchange (“CSE”) will be relieved by the Staff Notice, as it largely accords with the CSE’s existing position. Consequently, companies with ties to U.S. marijuana can still list publicly in Canada and comply with our securities laws, but should consider friendlier alternatives to the TSX/TSX-V, such as the CSE.

*Tyler Brent is a 2017/2018 articling student at the firm. 

Areas of Expertise

Related Industries

Related Publications

Publications Article
What American Employers Should Know About Canadian Employment Law By Fiona Brown and Michael F. Horvat Aug 19, 2019 For American companies, expanding operations into Canada often makes good business sense. Our similar professional cultures make doing business together easy, and our economic ties make it almost inevitable. However, employers who take the countries’ similarities for granted put themselves in a p...
Publications Article
OHS Due Diligence: If There Isn’t a Record, Did It Even Happen? By David S. Reiter Aug 19, 2019 Much has been, and continues to be, written about the corporate due diligence defence in Occupational Health and Safety Act prosecutions. Scores, if not hundreds, of articles have been written both about what it means and how courts will assess due diligence once it has been raised.
Publications Article
Ontario Court of Appeal Provides Guidance on Vesting Orders in Receivership – and Beyond By Kathryn Esaw and Miranda Spence Jul 17, 2019 Vesting orders have become one of the most powerful tools in an insolvency professional’s toolkit, providing a purchaser with the comfort that the encumbrances contributing to the debtor’s financial difficulties cannot follow to the new owner. In light of their importance, Canadian insolvency and...