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Some of Aphria's medical marijuana plants grow in their greenhouse in Leamington, Ont

GEOFF ROBIN/The Globe and Mai

The latest twist in U.S. marijuana policy is reverberating north of the border, as public companies and securities regulators wrestle with the legal risks of operating in a country where the Trump administration appears to have just changed the game.

On Thursday, U.S. Attorney-General Jeff Sessions issued a memorandum rescinding an Obama-era policy that allowed states to permit the growth, sale and use of cannabis within their borders, even though the drug is still illegal under federal law in the United States. The move has sparked uncertainty over whether federal prosecutors will start cracking down on cannabis production, possession and use – even when state rules are being met.

Canadian-listed marijuana shares plunged in the immediate hours after the Sessions memo was released, and sent companies racing to reassure investors that they have control of their legal risks.

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A number of marijuana companies with U.S. assets are listed on Canadian stock markets, attracted by a welcoming regulator and a group of retail investors eager to cash in on a piece of the green rush.

Canada's markets were swung open for pot companies with U.S. connections last year when the Canadian Securities Administrators (CSA), an umbrella group for the provincial securities commissions, said that these firms can go public in Canada as long as they clearly disclose to investors how they abide by state law and the liability they could face under federal law.

The CSA justified that decision by citing the Obama-era policy that Mr. Sessions has now revoked.

His memo raises fresh questions about the risks investors in U.S. cannabis firms face and whether Canadian securities regulators will rethink their approach.

"The present policy of buyer beware is really altered by this development," said Andrew Powers, a lawyer at Borden Ladner Gervais LLP who advises clients in the Canadian and U.S. cannabis sector. "I think it's plausible that the CSA will have to revisit this approach. It just doesn't work any more."

The Ontario Securities Commission, which spearheaded the disclosure policy, declined to comment on Thursday and again on Friday.

On Thursday, Sylvain Théberge, a spokesman for Louis Morisset, the chair of the CSA and head of Quebec's Autorité des marchés financiers, said: "Louis is still on vacation this week." Mr. Théberge did not respond to another request for comment on Friday.

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TMX Group Ltd. has diverged from the CSA's approach, issuing a sweeping ban against the new listings of cannabis stocks with U.S. exposure on the Toronto Stock Exchange and the TSX Venture Exchange. Its clearinghouse, the Canadian Depository for Securities Ltd., is also weighing a policy that could see it refuse to handle trades in any cannabis stock with ties to the United States.

After Thursday's big drop, pot stocks rebounded on Friday as companies sought to persuade investors that Mr. Sessions's move is no disaster for them.

Marc Lustig, chief executive officer of Ottawa-based CannaRoyalty Corp., which is pushing into California, echoed a common refrain among cannabis companies that "no legal change" has actually been made this week. The Obama-era policy, known as the Cole Memo, was never law. Instead, it offered guidance to federal prosecutors who have finite time and budgets, and a raging opioid epidemic with which to contend.

CannaRoyalty was up 6 per cent. Aphria Inc., which has stakes in medical cannabis producers in Arizona and Florida, gained 4 per cent on Friday. iAnthus Capital Holdings Inc., which is doing business in seven U.S. states including Colorado, rose 12 per cent. CannTrust Holdings Inc., which earns a royalty off U.S. sales of marijuana-infused coffee pods, climbed 6 per cent. Penny stock Golden Leaf Holdings Ltd., which operates in Oregon, also was up 3 per cent.

Liberty Health Sciences Inc., which is owned, in part, by Aphria, believes the Sessions memo has no impact on its medical business. Instead, Mr. Sessions was firing a warning shot at recreational markets, such as Colorado, Oregon and California, Liberty said in a statement.

The company is licensed to grow and sell medical cannabis to patients in Florida, one of more than two dozen states that has eased restrictions on the drug. In the past, the U.S. Congress has passed spending bills that don't earmark federal funds for prosecuting offences involving medical cannabis that comply with state law. The current bill is set to expire on Jan. 19.

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Liberty said that the amendment to the spending bill that touches on medical cannabis, known as the Rohrabacher-Blumenauer amendment, has withstood multiple legal challenges in court. It said that attempted prosecutions of medical cannabis players meeting state law have been "dismissed and/or shut down via injunctions based upon the Rohrabacher amendment."

Still, many Canadian companies with U.S. investments had used the Cole Memo in regulatory filings to bolster their case that it was safe to operate in the United States.

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