One of the goals at HUB Capital is to provide our advisors with a broad choice of product to meet the needs of their clients and with the impending legalization of cannabis in Canada we are starting to see the emergence of funds specializing in various aspects of the industry.

As we approach the legalization of cannabis in Canada we anticipate increased interest from clients and take this opportunity to provide the following guidance with respect to these offerings:
  • As Cannabis/Marijuana funds are considered high risk and sector specific funds, they are only suitable for clients that have a high risk tolerance, have the capacity to assume the loss of their investment, can withstand significant market volatility and have a reasonable level of investment knowledge
     
  • Investments into high risk sector funds should typically not exceed 10% of a client’s total investible assets or 20% of a client’s investment portfolio with HCI
     
  • Investments into high risk sector funds are also generally not appropriate for seniors or other vulnerable investors
     
  • The Canadian Securities Regulators (“CSA”) recently conducted a review of 70 reporting issuers in the cannabis industry and identified transparency, disclosure and accounting deficiencies, which are industry specific and notable given the recent rapid growth of this industry. These deficiencies may pose significant additional risks to the investor and the performance of the investment
     
  • Canadians working in, facilitating or investing in the legal cannabis industry may risk a lifetime ban on travel to the U.S. according to recent statements made by the U.S. Customs and Border Protection Agency
     
  • There is no historical performance for this new industry sector, therefore, you should provide the client with a copy of the simplified prospectus in addition to the Fund Fact document to assist your client with understanding the risks and other attributes of the fund
     
  • With impending targeted reviews of advisors by the MFDA, we anticipate there will be significant attention on advisors recommending Cannabis or other high risk, sector specific funds
It is your responsibility to fully understand any products that you recommend and only make recommendations that are suitable for your clients. Detailed notes of discussions, including how the client’s investment experience, investment objectives, risk tolerance and time horizon were determined, and/or recommendations must be maintained, however we recommend that all details be confirmed back to the client following the meeting as a best practice.

Please contact your Regional Compliance Officer or IP Specialist if you have any questions or wish to discuss in more detail.