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The Ontario Securities Commission has opened an investigation into CannTrust Holdings Inc., after revelations the company was growing cannabis without a licence.

OSC spokesperson Kristen Rose said the Joint Serious Offences Team, a partnership among the OSC, the RCMP’s Financial Crime Program and the Ontario Provincial Police Anti-Rackets Branch, is conducting the investigation. “In order to protect the integrity of our investigation, we will not be providing any further details or comment,” she said.

CannTrust is already under investigation by Health Canada for growing thousands of kilograms of cannabis in unlicensed rooms in its greenhouse facility in Pelham, Ont., in late 2018 and early 2019. The company has halted all sales pending the outcome of the investigation.

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CannTrust said the OSC contacted the legal counsel for the special committee of the company’s board Thursday, and advised it “that an investigation has been opened into matters and parties related to CannTrust.” It offered no further comment on that matter.

CannTrust also said it may have to restate its historical financial statements and will “likely miss” its Aug. 14 filing deadline for its second-quarter financial statements.

The company said its management “is of the view that there is significant uncertainty with respect to the potential impact of pending Health Canada decisions” on the valuation of the company’s inventory, the cannabis plants that are growing and the revenue it’s booking on its financial statements. That, CannTrust said, is because “Health Canada has broad discretion to exercise a wide range of regulatory powers.”

The pending Health Canada decisions “may also require restatement of certain of the Company’s historical financial statements and related management’s discussion and analysis for the 2018 and the first quarter of 2019, the company said.

CannTrust said Thursday it has established a blackout on trading by directors, officers and other insiders of the company that will last until the second-quarter reports, and any possible restated financials, have been filed.

A week ago, CannTrust fired its chief executive Peter Aceto “with cause” and forced Eric Paul, its chairman and largest shareholder, to resign. The departures came after a Globe and Mail story showing Mr. Aceto, Mr. Paul and other company executives were on a November, 2018, e-mail detailing regulatory violations, including unlicensed growing, seven months before federal inspectors discovered the breaches.

CannTrust shares have dropped 55.6 per cent since July 8, when the company revealed it had received a non-compliance order from health Canada.

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The board of CannTrust hired Bay Street law firm McCarthy Tétrault LLP and appointed a special committee of its board to investigate how the company grew cannabis in unlicensed facilities and who knew about it. The committee of the company’s three independent directors is chaired by retired accountant Mark Dawber.

The company could face sanctions from securities regulators on both sides of the border after CannTrust and several insiders sold US$195.5-million worth of shares in May using a prospectus that included production numbers from the illegal, unlicensed areas. CannTrust is listed on the New York Stock Exchange as well as on the Toronto Stock Exchange.

Mr. Paul and board member Mark Litwin, sold US$34.5-million as part of that U.S. stock offering via Cannamed, an investment vehicle. Cannamed also sold $6-million of CannTrust shares starting on Nov. 16 of last year – the day Mr. Paul responded to an internal e-mail detailing the illegal growing – through to mid-December.

A spokesperson from the U.S. Securities and Exchange Commission declined to comment Thursday on whether it was examining CannTrust.

In an interview on Tuesday, interim CEO Robert Marcovitch said, “We have not been directly in touch with the SEC because we work with the OSC as the principal regulator being on the Toronto Stock Exchange.”

Mr. Marcovitch said CannTrust is in “regular contact” with OSC. “We’ve been very transparent with everything we’ve been doing, what we’re doing and how we’re doing it,” he said.

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The Joint Serious Offences Team is a standing collaborative group between the OSC and law-enforcement officials that allows for “collaborative investigations of serious violations of the law using the provisions of the Securities Act or the Criminal Code,” and the possibility “for criminal charges to be laid by JSOT members,” according to an OSC statement in June on another matter. At that time, the OSC said JSOT has pursued 44 matters involving 62 accused since its 2013 founding.

Cheryl Reicin, a Torys LLP partner who works in New York and Toronto, said she thinks “the OSC and the SEC will probably have to figure out how they’re going work together on this.” The Globe interviewed her before the company’s disclosure of the RCMP-OSC investigation.

“I would say the OSC probably wants to take a leading role because it’s a Canadian company … they were primarily responsible for reviewing the disclosure,” she said. “Then again, the SEC is still new to cannabis, so I suppose they’re going be very interested because they want to know what happened here and how do they make sure it doesn’t happen going forward?”

Law firms in both the U.S. and Canada are seeking plaintiffs for attempts to bring class-action lawsuits against CannTrust on behalf of shareholders. The Pomerantz law firm and Robbins Geller – the two firms with the most class-action securities settlements in 2018, according to Institutional Shareholder Services – have both announced their interest in CannTrust. In Canada, Strosberg Sasso Sutts LLP said it’s proposing a class action for non-U.S. holders of CannTrust’s Toronto Stock Exchange-listed shares.

CannTrust has hired the Canadian arm of U.S. investment bank Greenhill & Co. to conduct a “review of strategic alternatives,” which could include a potential sale of the company.

“The nature, timing and outcome of the strategic review process will be influenced by, among other things, the resolution of the company’s regulatory compliance issues with Health Canada,” CannTrust said in a statement on Wednesday.

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