Authorities keep a close eye on the Canadian cannabis industry

The information on conflicts of interest published by traded cannabis producers is not always complete as the Canadian Securities Administrators (CSA) cite “transparency issues”. The authorities have noticed that the buyer or acquired companies (or their managers) have undeclared interests in another company. So regulatory authorities are keeping a closer eye on the Canadian cannabis industry.

There will be a closer eye kept on the Canadian cannabis industry considering problems observed by the CSA involving the disclosure of cross-financial interests.

In some corporate transactions, the authorities have noticed that the buyer or acquired company (or their managers) has undeclared interests in another company.

These cross-shareholdings may result in “conflicts of interest that may lead investors to revalue other variables, such as purchase price, timing of the transaction or potential payments,” said the CSA.

In addition, just passing the information in silence may also lead investors to question the merits of the business combination.

Keeping up with the Canadian cannabis industry and cannabis investments

The Canadian cannabis industry has attracted a lot of attention in recent years, with the stock market frenzy and the approach of legalizing cannabis for recreational use in 2018. This lead to producer groups eager to establish themselves in order to gain market share.

Medical cannabis is a sector that brings profit to the cannabis industry. One potentially useful cannabis investing tool is the Hemp.im app and its companion investment news website.

Hemp.im provides the latest news about the CBD and hemp sector, which is predicted to be worth more than $14.67 billion by 2026.

This important market is beginning to emerge in Poland and the rest of the world and could represent a unique investment opportunity.

In order for European investors to capitalize on cannabis opportunities, it is important that they remain informed.

CSA keeps an eye on mergers and acquisitions

The CSA did not specifically mention any companies but invited reporting issuers to provide all relevant information when they make an acquisition or are acquired by another company.

However, the CSA’s notice comes a year and a half after the Globe and Mail’s revelations regarding the purchase of Nuuvera by producer Aphria.

The Toronto Daily wrote at the time that some of Aphria’s officers and directors held shares in Nuuvera, but that they had never disclosed it to the investing public and the authorities.

Aphria’s management defended itself by saying that the interests were not large enough to warrant disclosure and that there is no obligation to do so.

The Board of Directors is also under the spotlight of the authorities. In some cases, the opinion notes, members of the board are presented as independent without the company taking into account “potential conflicts of interest or other factors that may compromise their independence, such as personal or business relationships with other directors and senior officers of the issuer.”

How some Canadian cannabis industry businesses find loopholes

In addition, the authorities are surprised to note that within some companies, the chair of the board is held by the same person who is also the chief executive officer.

The laws do not require companies to have separate roles. However, Rule 58-201, created by the CSA in the mid-2000s in the wake of corporate governance scandals, recommends that the Chair of the Board be an independent person.

“Where this is not appropriate, an independent director should be appointed lead director,” the CSA said, “Investors want to know what structures are in place to ensure the independence of the board.”

The authorities, while noting that the governance rules also apply to any company in emerging sectors, have indicated that “staff will continue to monitor these issues and take appropriate regulatory action where circumstances warrant.

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(Featured image by Nic Amaya via Unsplash)

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First published in LEDEVOIR, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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