9960707 - cannabis background macro close up

Canada’s marijuana sector boomed following the legalization of both medical and recreational weed, but the sector’s legal status in other markets remains complicated.

With such companies increasingly seeking listings in the U.K., the Financial Conduct Authority (FCA) is setting out its approach to this still-murky corner of the capital markets.

The FCA issued guidance that aims to clarify how it will deal with these market listing applications from various types of cannabis-related companies.

In the U.K., medical cannabis was legalized in 2018, and licensed medical cannabis companies that operate purely in the U.K. can be listed on its markets. However, allowing listings by foreign companies in the medical cannabis business remains “legally complex,” the FCA said.

Among other things, the regulator said that there “remains a risk” that the revenues from cannabis business, even from licensed medical producers in other countries, may constitute “criminal property” under U.K. law.

“We can’t assume a person who has been licensed in an overseas country would receive a licence here in the U.K. as licensing regimes differ globally,” it said.

Additionally, as recreational cannabis remains illegal in the U.K., any revenues generated by marijuana production for recreational purposes represents proceeds of crime as far as the U.K. is concerned — meaning that companies in the recreational pot business cannot be listed on the country’s markets.

Licensed medical cannabis companies with foreign operations may be able to get listed, the FCA said, if they can prove to the regulator that their business would be legal in the U.K.

The FCA said that it will undertake a consultation on its new guidance in this area, “in due course.”