The recent announcement by the Financial Conduct Authority (FCA) of guidance for companies in the medicinal cannabis sector, thinking about listing on UK exchanges, is a welcome development. While the 2018 legalisation of medicinal cannabis created a huge opportunity for aspiring UK businesses, the interest in expanding into the UK market from companies presently operating in mature markets like California (sales of $2bn) is almost certainly going to be great.
The FCA guidance is very sensible and to the point: be aware of the Proceeds of Crime Act 2002 (POCA) and the assumptions that flow from it. In essence, what this means is that possessing and supplying cannabis without a Home Office licence is ‘criminal conduct’ and as such all the monetary benefit flowing from that possession and supply can be confiscated.
What does this mean in practical terms?
The good …
UK medicinal cannabis businesses (with a Home Office licence) are free to list on UK exchanges. Similarly, overseas medicinal cannabis businesses, provided the FCA is satisfied that POCA does not apply, can be listed on UK exchanges.
The bad …
If an overseas recreational cannabis business (with the appropriate licences to do so in that jurisdiction) wants to be involved in the UK market by either seeking investment from a UK licensed medicinal cannabis business or entering alone (listing etc), POCA still applies. Any UK medicinal cannabis business (with a Home Office licence) receiving funds generated from overseas supply and sales for recreational use (still an offence in the UK) will be benefit from ‘criminal conduct’. In addition, overseas licences to sell recreational cannabis provide no UK reciprocity.
The ugly … but it doesn’t have to be with the best advice
Because there is a clear divergence in approach to cannabis commerce outside the UK, businesses interested in UK market participation need to be properly advised before taking the plunge. At Richardson Lissack, we have many years of experience advising businesses in sectors where regulation is complex and non-compliance can lead to criminal penalties. We have in-depth knowledge of the FCA and POCA and can support you and your business every step of the way.
Speak to our expert team today.