Proactive Investors - Run By Investors For Investors

Why UK investors shouldn’t worry if they own shares in overseas cannabis companies

IG is reportedly set to pull shares in US and Canadian cannabis stocks from its platform amid legal concerns, but its rivals, including Hargreaves Lansdown and Interactive Investor, won’t be following suit
woman smoking cannabis
Lawyers say the current legislation in the UK is too ambiguous

Online trading platforms aren’t set to follow IG Group PLC’s (LON:IGG) lead and stop offering shares in overseas cannabis companies.

The Telegraph reported over the weekend that IG, Europe’s largest online platform, is to sell its clients’ marijuana shares by the end of May after lawyers warned that investing in them might be a crime.

READ: London emerges as new hotspot for medicinal cannabis firms

The UK has recently relaxed the rules on medicinal cannabis, but the dealing, possession and use of the drug for recreational purposes remains a criminal offence.

But in Canada and certain US states, the drug can be used recreationally, which has led to a raft of businesses competing to make everything from the leaf itself thorugh to cannabis-infused drinks and sweets.

Many of those companies already have UK-based shareholders, but law firm Macfarlanes claimed earlier this year that investors on this side of the pond could be committing an offence under the Proceeds of Crime Act by trading recreational cannabis stocks.

“UK investors in cannabis-related companies, even indirectly, risk technically committing money laundering offences under POCA,” Macfarlanes concluded in their report.

Don't panic

So, should UK investors be worried if they have investments in overseas cannabis companies?

“No, absolutely not,” said Robert Jappie, an expert on cannabis law at Mackrell Turner Garrett in London.

Jappie said although the law was ambiguous, in practice there is little chance of a UK-based cannabis investor being prosecuted.

“[IG’s move] seems overly cautious to me. Any pull-out based on proceeds of crime concerns or potential criminal activity I think is entirely unnecessary.”

IG’s rivals, including Hargreaves Lansdown, AJ Bell and Interactive Investor seem to agree and have all said they will continue to offer shares in US and Canadian marijuana companies to customers.

Business as usual for other platforms

AJ Bell said its customers would still be able to invest in cannabis stocks as long as the investment settles in CREST – London’s online trade settlement platform – and the company is traded on a HMRC-recognised stock exchange.

Interactive Investor will continue to promote cannabis firms as well, although a spokesperson added it would continue to monitor any developments.

In an email, Hargreaves Lansdown said: “We are an execution only service and investors have the ability to invest in listed companies of interest to them. It is not for us to decide which are suitable for them.”

 IG couldn’t immediately be reached for comment.

View full IGG profile View Profile

IG Group Timeline

Related Articles

June 07 2019
The mineral resources investor thinks the macroeconomic environment is favourable to the mining sector. It has four investments that over the next 18 months or so could see it repeat the success it had with its investment in the Prognoz silver project in Russia.
The fund has doubled the capital it has raised to $100 million since September
April 11 2019
The company’s fund gives investors access to 3.25-6.45% returns over set terms.
March 18 2019
"The investment portfolio, combined with substantial cash, continues to provide a solid underpinning to our balance sheet, and developments in our fund management business offer a new source of fund management revenue in the next financial year," Braveheart said.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use