Regulator warns Canadian marijuana firms against ‘problematic practices’

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Canada’s stock market regulator warned publicly traded companies in emerging industries such as cannabis and fintech against “problematic promotional activities” that could artificially increase share prices and put investors at risk.

The warning from the Canadian Securities Administrators (CSA) – an umbrella organization for provincial securities regulators – came amid already highly volatile cannabis stock prices crashing to a 12-month low.

The Canadian Marijuana Index, a basket of stocks representing the cannabis sector, has fallen more than 40% since mid-October.

“We do see a higher incidence of problematic practices among venture issuers, and particularly among issuers involved in emerging industries like cannabis, fintech and battery metals,” the CSA said in a statement to Marijuana Business Daily.

The notice did not single out any cannabis companies, but experts say many of the practices it warns against have been observed in the industry.

Jason Zandberg, analyst at PI Financial in Vancouver, British Columbia, said unscrupulous actors making unsubstantiated claims to benefit stock prices is part of any rising equity market.

“There is no doubt that cannabis has been one of those rising-tide moments and there have been many misleading promoters abusing the widespread investor enthusiasm,” he said.

“I hope the (CSA) does more than just release notices to limit these practices.”

Examples of potentially misleading promotional activities listed in the notice include:

  • Dissemination of presentations, marketing materials, social media posts or other information that describe early stage plans with unwarranted certainty.
  • Issuing numerous news releases that disclose no new material facts.
  • Compensation of third parties who use social media and general investing blogs to promote issuers but do not disclose their agency, compensation and/or financial interest.
  • Announcements of name or business changes to reference an emerging industry or technology without a supporting business plan or comprehensive risk disclosure.
  • Suggesting without direct evidence from sampling or exploration that a property holds high potential for development – including production.
  • Reliance on projected peak versus long-term commodity prices.
  • Implying that a property holds a specific fair-market value without a feasibility report.

Chris Damas, editor of BCMI Cannabis Report, said the CSA is lumping diverse new sectors such as cannabis, blockchain and cryptocurrency together because they often play by the same playbook.

“Ironic isn’t it? They were asleep at the wheel on cannabis promotional activity for two years by my account,” he said.

Matt Lamers can be reached at

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