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Securities class actions: How to protect yourself and your cannabis business

By Matthew Fleming and Ara Basmadjian
October 8, 2020
  • Class Action
  • Securities Litigation
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Class action lawsuits against cannabis companies are on the rise. The proliferation of these lawsuits can be attributed to industry growth, market volatility, and corporate scandals. While Canadian cannabis companies are facing a variety of claims, including product liability and data breach claims, they, along their officers and directors, have increasingly been the target of several securities class actions in both Canada and the United States. In this article, Matthew Fleming and Ara Basmadjian explain why Canadian cannabis companies are a target and provide several suggestions about how to arm companies and their executives with the ammunition they need to defend securities class actions.  

Here are the top ten tips that officers and directors should consider to protect their company from a claim when defending a securities class action:

  1. Consider whether your company has sufficient controls over financial reporting or whether additional measures should be implemented
  2. Require timely disclosure of material changes to your company’s business, including any earnings projections which may have been impacted by COVID-19
  3. Review existing disclosure for compliance with accounting standards and securities law
  4. Avoid conflicts of interest, particularly when dealing with executive compensation and related-party transactions
  5. Establish a special committee of independent members of the board of directors when necessary to investigate discrete corporate issues
  6. Educate your employees and train them on the company’s obligations under securities law and the Cannabis Act and its regulations
  7. Create anonymous whistleblowing systems
  8. Implement a strong regulatory compliance regime
  9. Consult with legal and financial advisors on any material issues that could generate risk
  10. Adopt effective document retention policies

To learn more, read the article in its entirety here.

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Canada and US, cannabis, class action, securities, Top 10 tips
Matthew Fleming

About Matthew Fleming

Matthew Fleming is a partner in the Litigation and Dispute Resolution group of Dentons’ Toronto office and is the Co-Lead of the Firm’s global Financial Services Litigation group. His practice focuses on commercial litigation, including securities litigation, class actions, product liability and professional liability matters.

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Ara Basmadjian

About Ara Basmadjian

Ara Basmadjian is a partner in the Litigation and Dispute Resolution group at Dentons Canada LLP. His practice involves a variety of complex corporate, commercial and civil litigation matters. Ara has particular experience in cases involving commercial contracts, negligence, product liability, class actions, limitations law, cannabis in Canada, and extraordinary remedies, such as injunctions.

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