Securities regulators warn about lack of disclosure by medical marijuana firms

A new report says 25 publicly traded companies planning a foray into the medical marijuana industry didn't disclose all of the pertinent information to investors, and in many cases downplayed the risks.

The review by the Canadian Securities Administrators found in many cases, the cost and time required before a company can begin producing medical marijuana were not clearly discussed.

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The CSA says many companies also failed to disclose the fact that growing or selling medical marijuana requires a licence from Health Canada.

The companies were generally in the early stages of entering the medical marijuana industry.

The council of provincial securities regulators says it will continue to monitor announcements from companies exploring opportunities in the medical marijuana business.

The disclosure guidelines listed in the CSA's review apply to companies in any industry that are considering shifting their primary business to medical marijuana.

'Unacceptable' deficiencies in disclosure

"The level of deficiency in issuers' disclosure is unacceptable as investors need comprehensive, balanced information to understand the business changes being proposed by these issuers," said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission, in a statement.

Companies have been scrambling to get into the medical marijuana business since the federal government introduced rules last year restricting marijuana production to licensed commercial producers.

Under the previous rules, patients could grow their own pot, designate someone to grow it for them or buy it directly from Health Canada.

However, a group of patients has launched a legal challenge against the new rules. The Federal Court has issued an injunction allowing those who were already authorized to grow their own marijuana to continue doing so until the case is resolved.