The Monetary Conduct Authority (FCA) has printed a Major Market Technical Word to present additional steering for cannabis-related companies contemplating itemizing on the UK’s Official Listing.
This Technical Word comes off the again of steering launched by the FCA in September 2020 on this topic and the related, profitable itemizing of a small group of corporations since – with the most recent example in May.
In brief, the Technical Word explains that, due to the continued authorized dangers related to cannabis-related companies working within the UK, the FCA considers that extra due diligence will likely be vital on such corporations in the event that they search to confess their securities to the Official Listing. The scope and extent of this extra due diligence will likely be thought of and decided on a case-by-case foundation, however the FCA clearly advises corporations on this space to be “proactive” and interact with the FCA on this difficulty at an early stage, noting that the absence of early engagement has the impact of “prolonging the eligibility overview”.
The Technical Word is a useful reminder of the continued, thorny authorized points on this space. However that some cannabis-based medicinal merchandise (CBMPs) at the moment are authorized within the UK, there stays a threat that the proceeds from abroad medicinal hashish companies could represent felony property below the Proceeds of Crime Act 2002 (POCA). This can be so even the place the corporate possesses a licence issued by an abroad medicines or prescription drugs licensing authority.
Leisure hashish corporations
The Technical Word is obvious – proceeds from the possession and provide of hashish for leisure functions are the proceeds of crime below POCA, even when they’re generated in a jurisdiction the place such conduct is authorized. The FCA would due to this fact not admit the securities of an organization with any leisure hashish enterprise, immediately or not directly, to the Official Listing.
UK-based CBMP corporations
Purely UK-based corporations that produce and provide CBMPs might be admitted to the Official Listing if they’ve the suitable Dwelling Workplace licenses and in any other case fulfill the standards for itemizing. The Firm’s total operation, together with its provide chain, will must be UK-based. Additionally it is value noting that corporations that deal purely with cannabidiol (CBD) won’t require a Dwelling Workplace licence as a result of CBD just isn’t a managed substance and due to this fact doesn’t set off the identical points as hashish or CBMPs. Nonetheless, this will likely be topic to affirmation – for instance by scientific evaluation – that the CBD a enterprise trades in doesn’t the truth is include any managed substance.
Abroad corporations, typically in jurisdictions the place hashish is absolutely legalised (together with for leisure functions) current essentially the most tough points below POCA and for UK-based companies and traders. An abroad cannabis-related firm might be admitted to the Official Listing (which has occurred below the brand new steering) so long as the FCA are happy the enterprise doesn’t give rise to any cash laundering offence below POCA. Primarily, because of this the abroad firm’s enterprise actions can be lawful within the UK, if carried out right here.
The FCA specify that as a part of an eligibility overview of an abroad firm they are going to request acceptable authorized opinions to handle, at least: the actions of the applicant firm; affirmation of the legality of these actions; affirmation that such actions are for functions which can be authorized within the UK; particulars of any licenses held overseas; and particulars of the corporate’s observe document.
The discharge of this Technical Word, coming not lengthy after the itemizing of a brand new cannabis-relating firm in Could this 12 months, is an attention-grabbing step ahead by the FCA. It’s clear that the issues thrown up by POCA in relation to the hashish business stay stubbornly in place. However the clear obstacles to sure companies and funding alternatives that it creates – there’s nonetheless no signal of a change within the regulation to resolve the difficulty.
However, the FCA are responding, a minimum of partially, to the business actuality and are taking steps to attempt to enable corporations within the hashish house to function as they’d want to. Regrettably for these corporations this appears to require, a minimum of for now, extra due diligence and engagement with the FCA. All companies that function on this house must be alert to the seriousness with which the FCA seem to deal with the longstanding issues POCA causes.
“PoCA defines felony property with regards to ‘felony conduct’, which is outlined intentionally broadly. Prison conduct contains not solely conduct which is a felony offence in any a part of the UK but additionally any conduct outdoors of the UK which might be a felony offence within the UK if carried out right here. For instance, if a pharmaceutical firm produced or equipped CBMPs within the UK with out acceptable Dwelling Workplace licences, they’d be committing a felony offence (except one of many restricted exemptions applies). We can’t assume an individual who has been licensed in an abroad nation can be carrying on lawful enterprise within the UK as licensing regimes differ globally”.