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TSX Companies Involved in U.S. Cannabis Face Listing Review

October 17, 2017


Yesterday, exchange operator TMX Group Ltd. (TSX:X) issued a bulletin to issuers regarding involvement in the United States marijuana industry, and how it may affect their listing status going forward. For companies like Aphria Inc. (TSX:APH) (OTC:APHQF), with substantial investments in U.S. cannabis operations, this could be bad news. 


Operating the TSX as well as the TSX Ventures Exchanges, TMX Group is certainly a heavyweight when it comes to the Canadian capital markets. If the 800 pound gorilla puts out a notice to cannabis companies - it moves markets.


While the release only applies to a handful of companies (as many of them have no U.S. operations), the companies that it applies to are likely to face an in-depth listing review. Additionally, this notice presumably discouraged any existing Canadian issuers from exploring investment opportunities here in the states. 


The bulletin is primarily based on a few key points:

  • Marijuana remains a Schedule I drug under the U.S. federal Controlled Substances Act

  • This means it is illegal under U.S. federal law to cultivate, distribute or possess marijuana in the United States

  • Furthermore, financial transactions involving proceeds generated by, or intended to promote, marijuana-related business activities in the U.S. may form the basis for prosecution under applicable U.S. federal money laundering legislation


Going forward, cannabis companies will be grouped into two categories - issuers with business activities that involve the cultivation, distribution or possession of marijuana in any jurisdiction, and issuers that do not cultivate, distribute or possess marijuana, but that appear to be engaging in "Ancillary Services Activities."


Ancillary Services Activities are defined as "providing services or products that are specifically designed for, or targeted at" entities engaging in activities related to the cultivation, distribution or possession of marijuana in the United States. Companies will also fall into this category if they have "commercial interests or arrangements with entities engaging in" the services described above. 


As mentioned above, this could be bad news for companies like Aphria Inc., which owns a major stake in Liberty Health Sciences, Inc. (CSE:LHS) (OTC:LHSIF). With that being said, it would not be the end of the world for the company, as the Canadian Securities Exchange is a viable listing venue, in addition to the exchanges operated by OTC Markets Group, Inc. (OTC:OTCM).


To stay up to date with important developments in the cannabis industry, be sure to subscribe to one or more of our free email newsletters. Also, connect with The Daily Marijuana Observer on Facebook, Twitter, StockTwits and Instagram!



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