FCA gives green light to listings of cannabis-related businesses

The FCA has expressed concerns that the listing of cannabis related businesses who operate outside the UK, even medicinal cannabis business who develop and produce medicinal cannabis under licence and in accordance with local law and regulation, result in a risk that the proceeds from those business are “criminal property” for the purposes of the Proceeds of Crime Act 2002 (“POCA”).

“Criminal property” is property which is obtained from “criminal conduct” and pursuant to POCA, it can be an offence if conduct is carried out overseas (even in accordance with local law and regulation) which would be criminal conduct if it were carried out in the UK.

The FCA stated that its approach to the listing of the securities of cannabis related business is as follows:

• Recreational: Any companies who undertake, or who derive a benefit, profits, from recreational cannabis operations (regardless of whether these are fully regulated and licenced in overseas jurisdictions) remain unable to have their securities admitted to the Official List.
• UK Medical: UK-based medicinal cannabis companies, operating in accordance with applicable law and regulation in the UK, can have their securities admitted to the Official List. Medicinal cannabis was legalised in the UK in November 2018.
• Overseas Medical: Medicinal cannabis companies who have operations outside the UK may have their securities admitted to the Official List, provided they can satisfy the FCA that their activities would not be a breach of POCA, that their activities would be legal if carried out in the UK and if they can explain to the FCA the nature of local licensing regime.

We anticipate that companies operating in jurisdictions with medicinal cannabis regulatory regimes which are similar, or more well developed, than those of the UK are more likely to satisfy the FCA’s requirements.

The FCA has stated that guidance and consultation in respect of its key findings is to follow.

There has not as yet been any guidance or announcement provided by AIM Regulation, in respect of AIM, but we would hope that they are able to adopt a similar approach to that taken by the FCA, so as to provide continuity across London’s capital markets.

Nick Davis, CEO of Memery Crystal commented:

“This is great and overdue news for the medicinal cannabis sector in the UK, both for medicinal cannabis companies themselves, but also for patients, who have yet to receive easy access to the products they need.

Our firm, and a number of our clients, have worked hard over the past few years to have medical cannabis companies admitted to the London markets. With greater clarity from the FCA we hope investors will also support companies coming to market to drive the sector forward.”

Memery Crystal’s Cannabis Team
The Cannabis sector is a complex area, but Memery Crystal has the expertise to help you navigate it. We are the leading UK law firm advising the emerging cannabis sector on business set-up, capital markets, mergers and acquisitions, private fundraising, regulation, intellectual property & technology and commercial contracts.

Find out more about the work we are doing in the medicinal cannabis sector here.