Canada Sees Need For Marijuana Investor Protection

36The Canadian Securities Administrators (CSA) is cautioning investors in Canadian medical marijuana companies about the investing concerns that some of those companies raise.

According to CSA chairman Bill Rice, the market watchdog group found 25 companies whose public disclosure elicited “serious” investing protection concerns.

He said companies often promoted benefits through “unbalanced and promotional disclosure” but failed to specify the risks involved.

This level of deficiency in such disclosures “is unacceptable”, Rice said, because “investors need comprehensive, balanced information.”

In conducting its review, the CSA sent letters to all companies involved, and specifically sought out a “clarifying disclosure document” from about 92% of them.

Among the areas in which the disclosures were lacking were the obligations and barriers in entering the marijuana industry, as well as the cost and time needed for a company to begin its licensed operations.

There was even a “failure to acknowledge” the fact that medical cannabis companies are not allowed to grow or sell without a license from Health Canada. Further, there was only minimal discussion on Health Canada’s licensing requirements and what approvals a cannabis company actually needs to obtain.

The CSA stated that it intends to continue reviewing announcements from companies exploring the medical marijuana space. It added that its disclosure guidance can be applied to companies in any other industry.

In the meantime, investors must practice caution in putting money to a young industry such as legal marijuana. While the industry definitely shows indications of thriving, there are still plenty of unscrupulous companies that have not yet been weeded out. Having substantial knowledge on legal cannabis, a wise education on investing, and a close watch on the market are essential in making a good investment in this industry.

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