(This story has been updated with a statement from Health Canada.)
Citing noncompliance with Canada’s federal cannabis law and regulations, embattled producer CannTrust says it has received a Notice of License Suspension from Health Canada.
It is the second cannabis company to have a federal license suspended in recent weeks.
CannTrust has 10 business days to respond to Health Canada’s action, the regulator told Marijuana Business Daily.
“Health Canada inspectors have delivered the notices of suspension to CannTrust Inc. today, and are seizing and detaining all cannabis products at both sites,” Tammy Jarbeau, media relations officer, said in an email.
“Health Canada may also determine that additional compliance and enforcement actions are warranted.”
Health Canada said it decided to suspend CannTrust’s cannabis licenses after recent inspections of its Pelham and Vaughn facilities.
Under the terms of the suspension, CannTrust is permitted to take necessary actions to “maintain the viability and quality of cannabis plants and cannabis products” while Health Canada reviews any CannTrust response.
In a statement, CannTrust said the action constitutes a partial suspension of its license for standard cultivation and a full suspension of its licenses for standard processing, medical sales and research.
The Ontario company said it will be allowed to cultivate and harvest existing batches previously propagated while the suspension remains in effect.
Since a whistleblower alerted Health Canada in July to allegedly unlicensed cultivation at the company’s cultivation facility in Pelham, Ontario, CannTrust has been in a tailspin.
In the weeks following, the company halted all adult-use and medical sales, fired its senior leadership and is facing an investigation by police and securities regulators.
‘Doesn’t matter how big you are’
Matt Maurer of Torkin Manes cannabis law group in Toronto, said Health Canada’s move comes as no surprise to industry watchers.
“Certainly it’s the most significant case of a license being suspended thus far,” he said.
CannTrust’s suspension comes on the heels of another handed down to British Columbia-based Evergreen Medicinal Supply on Aug. 9 over noncompliance with federal law and regulations.
“It signals that none of the licensees are above potentially running into problems. It doesn’t matter how big you are, or how well run you appear to be,” Maurer said.
CannTrust had been considered an industry leader.
Its now deposed former CEO Peter Aceto joined the cannabis company from Tangerine bank, a subsidiary of Scotiabank, last October.
“This was a company that from the outside looked like it was very well run, massive company that had really good things going for it. And then all these things sort of came out of left field, which ultimately resulted in their license getting suspended.”
Takeaway
Maurer said other cannabis companies should think twice about bending the rules.
“Either this will be the start of a series of suspensions or actions taken by Health Canada, or hopefully to the extent that there are other companies that are not being compliant, this will be a wake up call to get everything in order before Health Canada comes knocking,” he said.
“Clearly the takeaway is that cutting corners, if that’s what people are going to do, doesn’t pay off in the long run.
“Because cutting a corner here and there results in a license suspension and the inability to carry on business for an extended period of time far outstrips any potential benefit you would have gotten by cutting some corners.”
Next steps
Health Canada’s notice states that CannTrust’s licenses can be reinstated if certain conditions are met, including if the reasons for the suspension no longer exist or if the company demonstrates the suspension was unfounded.
According to CannTrust, Health Canada says the implementation of the following measures could address the public health and safety risks that contributed to the suspension:
- Measures to make sure cannabis is produced and distributed only as authorized by law and regulations, including systems to control the movement of marijuana.
- Steps to recover any cannabis that was not authorized by CannTrust’s license.
- Actions to improve compliance with the law and regulations among key personnel.
Improved measures to maintain records, including a plan to improve inventory tracking.
According to Health Canada’s Compliance and Enforcement Policy for the Cannabis Act, a range of enforcement actions are available.
Those include:
- License revocation.
- Issuance of a Ministerial Order.
- Monetary penalties up to 1 million Canadian dollars ($740,000).
CannTrust Tuesday halted trading of its shares (TRST) on the Toronto Stock Exchange pending the announcement. Before trading was stopped, CannTrust’s shares were last sold at CA$1.72.
That’s 87% off the stock’s all-time high almost one year ago.
The company was also dropped from the S&P/TSX Composite Index last week.
CannTrust’s shares trade on the Toronto and New York stock exchanges.
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