TMX talks spurred by ‘chilling effect’ of U.S. policy

TORONTO Marijuana industry insiders say they have met with the operators of Canada’s largest stock exchange to devise a policy on investing in the U.S., where growing and selling cannabis violates federal laws.

Lawyers who work with publicly traded Canadian marijuana producers say there is an unwritten rule that companies traded on the Toronto Stock Exchange or the TSX Venture Exchange are not permitted to have investments in the U.S. cannabis sector.

TMX Group — the company that operates both the TSX and Venture Exchange — is now looking to codify that policy, particularly given the uncertainty from the change in administration in the U.S., according to industry observers.

“The big issue that’s got the exchanges taking a harder look really relates to the change in administration since President Trump’s election,” said Hugo Alves, corporate and commercial partner at Bennett Jones LLP.

“That is causing a bit of a chilling effect.”

Although more than two dozen U.S. states have decriminalized the drug, either for medicinal or recreational use, marijuana remains a Schedule 1 narcotic in America and its possession, cultivation, usage and sale contravene federal laws.

When Barack Obama was president, the U.S. government was choosing not to enforce the federal marijuana laws in states that had voted to decriminalize the drug. But the new administration has a much harsher, anti-marijuana stance, creating risk for shareholders who have exposure to the U.S. cannabis space.

TMX Group would not confirm that it is holding meetings with the marijuana sector in order to formulate a policy regarding U.S. investments, saying in an email that it does not comment on “individual issuer affairs.”

“We evaluate all issuers and their eligibility to list, and to remain listed on our markets, according to our published policies and guidance,” said spokesman Shane Quinn.

But Vic Neufeld, the president and CEO of Aphria, says he has attended such meetings. The Leamington, Ont.-based firm first dipped its toes into the U.S. market over a year ago with an investment in Copperstate Farms, a medical marijuana producer in Arizona. Neufeld said the company fully disclosed the investment.

“The regulators knew everything,” Neufeld said. “We didn’t hide anything. In fact, we over-disclosed.”

It wasn’t until Aphria started making headlines about an investment in Florida — through a new company it is creating called Liberty Health Sciences Inc. — that the regulators started to take notice, Neufeld said.

Now, the firm is in meetings with the TSX to discuss investing in jurisdictions whose regulations differ from Canada’s, he said.