Cannabis Prospect Magazine - Sept. '20 - Issue #10

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SECURITIES CLASS ACTIONS HOW TO PROTECT YOURSELF AND YOUR CANNABIS BUSINESS

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lass action lawsuits against cannabis companies are on the rise. The proliferation of these lawsuits can be attributed, in large part, to industry growth, market volatility and corporate scandals. While cannabis companies are facing a variety of claims, including product liability and data breach claims, Canadian cannabis companies, and their officers and directors, have increasingly been the target of several securities class actions in both Canada and the US. What is a Securities Class Action? From a procedural perspective, a class action begins with the proposed representative plaintiff issuing a statement of claim and bringing a motion before the court for an order certifying the proceeding and appointing him or her as the representative plaintiff for the class. The certification motion is frequently the most important step in a class action and it is where battle is squarely joined between the parties. Generally, in Canada, the court will certify a class action where: the claim discloses a cause of action; there is an identifiable class of two or more persons; the claims of the class members raise common issues; a class action would be the preferable procedure for the resolution of the common issues; and there is an appropriate representative plaintiff. Securities class actions most typically arise in the primary market, such as in the context of an offering (including initial public offerings under a prospectus) or trading in the secondary market through the stock exchange.

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Cannabis Prospect Magazine | September 2020