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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.

Quick facts: IG Group

Price: 683.6 GBX

Market: LSE
Market Cap: £25.49 m

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