Canada's TMX asks regulators for rules for U.S.-linked pot stocks

TORONTO (Reuters) - Canada's TMX Group Ltd is seeking guidance from the country's securities regulators, it said on Thursday, as it weighs how to deal with marijuana companies listed in Canada with interests in the United States, where the business remains federally illegal. The move seeks to draw a line under policy uncertainty for investors and companies that pits more liberal rules around cannabis cultivation and distribution in Canada against a Trump administration that has taken a harder line. While TMX has largely shied away from listing marijuana-related companies with U.S. investments or operations on its own Toronto Stock Exchange (TSX) and other venues, it also processes all Canadian equity trades via its clearing house, the Canadian Depository for Securities. That means dealing with the string of marijuana companies that have swarmed to the smaller Canadian Securities Exchange (CSE), to raise funds, often with an eye on U.S. export opportunities. TSX-listed producer Aphria Inc also has investments in Arizona and Florida, where medical marijuana is legal. Money has poured into Canada-listed stocks recently, in contrast to the tough financing environment for U.S. marijuana companies operating in states that have made cannabis legal. A more liberal regulatory framework in Canada has led to an explosion in publicly-traded marijuana companies, serving the existing medical market and preparing for the country-wide legalization of cannabis for recreational use, expected by mid-2018. Consultants estimate that the size of the marijuana market could range between $5 billion to $10 billion. However, a tougher line in Canadian capital markets could cut that flow significantly, and would essentially close off the opportunity for expansion into larger markets in U.S. states where marijuana is legal. TMX said it is "engaged" with an umbrella group of provincial securities regulators in order to clarify what it called a "complex matter" that "requires close examination and careful consideration" and that it would say more about the issue as soon as it could. It said it had not in the meantime banned the clearing of U.S.-linked marijuana stocks listed in Canada. The CSE and Aphria were not immediately available to comment. The lack of a U.S. federal framework has limited the ability of U.S. marijuana companies operating in states where cultivation and distribution is legal to access capital and other financial services. (Reporting by Alastair Sharp; editing by Diane Craft)