According to a review by the Canadian Securities Administrators' (CSA) released Wednesday, Canadian cannabis companies are not providing enough disclosure on a broad level.
The CSA published Staff Notice 51-357 Staff Review of Reporting Issuers in the Cannabis Industry, which looked at the disclosure of 70 reporting issuers operating in the cannabis industry. Though the review included reporting issuers with varying levels of involvement in the industry and with operations in different countries, regulators did not list any company names.
The CSA's findings? Disclosure is not good enough.
“Given the significant growth and interest in the cannabis industry, it is imperative that investors specific with transparent information about issuers’ financial performance and risks related to their operations,” said Louis Morisset, CSA chair, and president and CEO of the Autorité des marchés financiers. “Our review shows that the quality of disclosure in this area needs to be enhanced, and we encourage cannabis issuers to use this publication as a guide to make improvements.”
Licenced cannabis producers "often did not provide sufficient information in their financial statements and management’s discussion and analysis (MD&A) for an investor to understand their financial performance. International Financial Reporting Standards (IFRS) require issuers to record growing cannabis plants at their fair value," according to the review.
Further findings include:
100% of the licenced cannabis producers reviewed needed to improve their fair value and fair value related disclosures.
A number of issuers didn't comply with securities requirements for forward-looking information and guidance for providing balanced disclosure requirements.
74% of issuers with cannabis operations in the US did not provide sufficient disclosure about risks related to their US operations to satisfy the disclosure expectations that have been set out in a previous CSA Staff Notice 51-352 (Revised) Issuers with US Marijuana-Related Activities.