Guidance from the Financial Conduct Authority (FCA) sets out rules for companies providing medicinal cannabis products to float on the UK Stock Exchange.
The FCA has introduced rules that ban recreational cannabis but set up a path for medicinal cannabis companies to introduce their companies to the London Stock Exchange.
Medicinal Cannabis has been legal in the UK since 2018 but, unlike other countries, the market has remained unusually restricted and regulated. Prior to this listing, the largest companies that deal with cannabis would export to areas like North America where the legality of cannabis was more relaxed
The FCA finally released guidance on the matter late last week. They will begin to look at applications from businesses that deal in cannabis. It will be far easier to float on the London Stock Exchange if the company is based in the UK. If they produce the medicinal cannabis or cannabis oil in the UK with the appropriate Home Office licences, the applications would be painless. Companies based outside of the UK will face far more scrutiny.
If a company is not based in the UK, they have to make sure that they do not operate outside of UK law. What this means is that whatever business a company is engaged in, anywhere in the world, must not breach UK law. If any US company produces cannabis for recreational purposes, they could not float on the London Stock Market.
The FCA lays it out.
In the press release from the FCA they wrote that,
“While medicinal cannabis was legalised in the UK in 2018, investment in overseas-licensed medicinal cannabis businesses remains a legally complex area. We consider that there remains a risk that the proceeds from overseas medicinal cannabis business may constitute ‘criminal property’ for the purpose of the Proceeds of Crime Act 2002 (PoCA). This includes where the company possesses a licence issued by an overseas medicines or pharmaceuticals licensing authority.
This is because PoCA defines ‘criminal conduct’, the key definition under the Act, deliberately broadly. It captures not only an offence in any part of the UK but also any conduct outside of the UK which would be criminal in the UK if carried out here. Possessing and supplying cannabis for recreational use remains a criminal offence in the UK. If a pharmaceutical company supplied cannabis in the UK without appropriate Home Office licences, they would be committing a criminal offence. We can’t assume a person who has been licensed in an overseas country would receive a licence here in the UK as licensing regimes differ globally.”
What does this mean?
This is a major step forward for the cannabis industry in the UK, but we run the risk of stopping here. The amount of intricate and labyrinthine legislation set up to avoid any sort of recreational cannabis companies even thinking about floating on the Stock Exchange will prevent companies from making any sort of concerted effort to push for full cannabis legalisation.