APHRIA INC 
TORONTO (Reuters) - Canada's TMX Group Ltd (>> TMX Group Ltd) is seeking guidance from the country's securities regulators, it said on Thursday, as it weighs how to deal with marijuana companies listed in Canada with interests in the United States, where the business remains federally illegal.
The move seeks to draw a line under policy uncertainty for investors and companies that pits more liberal rules around cannabis cultivation and distribution in Canada against a Trump administration that has taken a harder line.
While TMX has largely shied away from listing marijuana-related companies with U.S. investments or operations on its own Toronto Stock Exchange (TSX) and other venues, it processes all Canadian equity trades via its clearing house, the Canadian Depository for Securities (CDS).
That means dealing with a string of marijuana companies that have swarmed to the smaller Canadian Securities Exchange (CSE) to raise funds, often to fund U.S. opportunities.
TSX-listed producer Aphria Inc (>> Aphria Inc) also has investments in Arizona and Florida, where medical marijuana is legal. The company was not immediately available to comment.
The chief executive of the CSE, Richard Carleton, who also sits on the board of the CDS, said regulators have allowed such stocks to list with adequate disclosure and that he is actively exploring alternatives in case TMX decides to stop clearing their trades.
"We view it as a matter of risk disclosure for the issuers and their prospective investors and not as an institutional risk to our exchange," he said, pointing out that the Ontario Securities Commission recently approved the prospectus of CannTrust, a company with operations in both countries due to list on the CSE on Monday.
Money has poured into Canada-listed stocks recently, in contrast to the tough financing environment for U.S. marijuana companies operating in states that have made cannabis legal.
A more liberal regulatory framework in Canada has led to an explosion in publicly-traded marijuana companies, serving the existing medical market and preparing for the country-wide legalization of cannabis for recreational use, expected by mid-2018. Consultants estimate the size of the Canadian marijuana market could range from $5 billion to $10 billion.
However, a tougher line in Canadian capital markets could cut that flow significantly and would essentially close off the opportunity for expansion into larger markets in U.S. states where marijuana is legal.
TMX said it is "engaged" with an umbrella group of provincial securities regulators in order to clarify what it called a "complex matter" that "requires close examination and careful consideration."
(Reporting by Alastair Sharp; Editing by Diane Craft and Leslie Adler)
By Alastair Sharp
