CSA outlines rules for cross border pot listings, opens flood gates

TORONTO – The Canadian Securities Administrators set out “specific disclosure expectations” for marijuana industry firms with investments in the U.S., offering much-anticipated clarity for companies that operate on both sides of the border.

The umbrella organization for Canada’s provincial and territorial securities regulators put out a staff notice, saying that cannabis companies must tell investors about certain risks when they invest south of the border – where growing and selling marijuana remains illegal under federal laws.

READ MORE: Don’t expect legal pot to cripple organized crime: SFU criminologist

That includes disclosing the legal regime and limitations a company faces in the U.S. jurisdictions where it operates, as well as the potential fallout if the legal landscape for marijuana changes.

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WATCH: Public consultation process begins over legalized marijuana

1:40 Public consultation process begins over legalized marijuana

The move provides much-needed clarity for the cannabis industry, which has operated under an unwritten rule that companies which trade on the Toronto Stock Exchange or the TSX Venture Exchange must not invest in the U.S. cannabis sector.

Canadian marijuana companies had largely handled the hazy legality by focusing on markets outside the U.S., or by listing on the smaller and less risk-averse Canadian Securities Exchange.

The guidelines apply to all companies with U.S. marijuana-related activities, including direct and indirect involvement in growing and distribution, as well as those that provide goods and services to third parties involved in the U.S. industry.