Canadian securities regulators are calling on companies in the cannabis industry to strengthen their governance and disclosure practices to ensure investors are aware of potential conflicts of interest for executives and directors relating to M&A activity.
The Canadian Securities Administrators, an umbrella organization for provincial securities regulators, issued a staff notice on Tuesday saying it will monitor developments in the cannabis industry after observing a “higher-than-usual crossover” of potential conflicts of interest, such as overlapping debt and equity, in the sector’s M&A transactions over the past several years.
Governance has emerged as a hot button issue for several Canadian cannabis companies, such as Aphria Inc., CannTrust Holdings Inc. and Cronos Group Inc., and eventually led to the departure of some executives or board members after potential conflicts were disclosed.
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