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CannTrust Stock Falls After Cannabis License Suspended By Health Canada

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Canada-based CannTrust Holdings Inc. (CTST) said Tuesday that Health Canada has suspended the company's license to produce and sell recreational and medical cannabis in Canada. Shares of CannTrust tumbled 14 percent in the regular trading session on the New York Stock Exchange following the news.

The suspension of the license is due to CannTrust's previous non-compliance with certain regulatory requirements. In July, Health Canada found CannTrust to be non-compliant with regulations for growing cannabis in unlicensed greenhouse rooms and also for providing inaccurate information to the regulator.

CannTrust said it received a notice of license suspension on Tuesday from Health Canada.

According to the troubled cannabis company, Health Canada's notice constitutes a partial suspension of its licence for standard cultivation and a full suspension of its licences for standard processing, medical sales, and research.

While the suspension is in effect, CannTrust will be permitted to cultivate and harvest existing batches of previously propagated lots of cannabis as well as conduct ancillary activities such as drying, trimming and milling.

But the company is not permitted to grow new lots or batches of cannabis, or engage in its sale or distribution during the suspension.

Health Canada said it will reinstate CannTrust's licences if the reasons for the suspension no longer exist or if the company proves that the suspension was unfounded.

Health Canada has outlined several measures CannTrust could implement to address the public health and safety risks that contributed to the regulator's decision regarding the license suspension.

The measures include ensuring that cannabis will be produced and distributed only in authorized areas, and recovering marijuana that was not authorized by CannTrust's license.

Health Canada also recommended improving CannTrust employees' knowledge and compliance with the law, and developing a plan to improve the company's record-keeping and inventory tracking.

CannTrust said it is reviewing the Health Canada notice with its counsel and other advisors. The company remains committed to being in full regulatory compliance.

After Health Canada identified non-compliance in certain aspects of CannTrust's operations in July, the company appointed a Special Committee of the board to investigate the causes of the non-compliance and to provide direction to its remediation efforts.

CannTrust also terminated Chief Executive Officer Peter Aceto for cause as well as demanded the resignation of Chair Eric Paul, and placed a voluntary hold on the sale and shipment of all its cannabis products.

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