International banking giant J.P. Morgan Chase & Co. has told its prime brokerage clients it will no longer allow them to buy stocks in some US cannabis companies from today (Monday).
Forbes reports the move will apply to US cannabis firms that have a “direct nexus to marijuana-related activities” and are not listed on the Nasdaq, New York or Toronto Stock Exchanges.
In a letter to clients quoted by Reuters, the bank said: “J.P. Morgan has introduced a framework that is designed to comply with US money-laundering laws and regulations by restricting certain activities in the securities of US marijuana-related businesses.”
Under the new policy, J.P. Morgan won’t allow new purchases or short positions in such “plant-touching” cannabis business stocks from November 8. Clients who already have positions in the affected companies will be allowed to liquidate their current holdings.
CEO of the US Cannabis Council Steve Hawkins said: “J.P. Morgan’s move to block its customers from buying securities in fully legal, regulated cannabis companies is beyond disappointing. Publicly traded cannabis companies operate entirely within the law, and the industry is poised for tremendous growth.”
He added: “J.P. Morgan’s new policy is regressive and at odds with the majority of Americans, who want legal, regulated cannabis. What’s more, it’s self-defeating. The end of federal cannabis prohibition is within sight, and the industry is already growing rapidly.”
The Nasdaq and New York Stock Exchange allow some cannabis companies, including Canadian firms that do not sell marijuana products in the US, to list their securities. But with cannabis still illegal at the federal level, companies involved in cultivation or sale in the US are not allowed.
Cannabis companies struggling to raise capital are pinning their hopes on federal reform such as the Secure and Fair Enforcement (SAFE) Banking Act as the best chance of ending restrictive banking policies.