The FCA proposes new listing guidance for cannabis-related businesses – a positive step for investors concerned about the Proceeds of Crime Act

15 July 2021

In September 2020 the FCA published a statement regarding the listing of cannabis-related businesses (CRBs) in the UK. Since then several CRBs have been admitted to the London Stock Exchange (LSE) and appetite for investments in the medicinal cannabis industry continues to grow. The FCA has now published the proposed technical note it had promised in order to offer more detailed guidance to CRBs considering an application for admission of their securities to the Official List. This clarity is welcome because the stringent application process will serve to reassure and encourage potential investors and the potential rewards for a company that can attain a listing in the UK are significant.

Whilst the technical note is subject to a formal consultation and will only become official guidance once this process has been completed (please see our Corporate and Commercial blog here), the main thrust of the document is unlikely to change, reflecting as it does the FCA’s original stance in September last year. What it does do is provide welcome detail of the evidence would-be applicants will need to provide in order to pass the FCA’s eligibility review which, as the guidance makes clear, is substantial. There are no real surprises in these details but there are several requirements which may not have been fully appreciated before, specifically:

  • The FCA will not admit the securities of a company with any recreational cannabis business, directly or indirectly, to the Official List. This statement underlines the meticulous approach the FCA will take in refusing admission to businesses with indirect links, for example through partners or affiliates, to recreational cannabis production which may be lawfully undertaken in other jurisdictions but which remains unlawful in the UK.
  • UK-based companies producing and supplying cannabis-based medicinal products, licensed cannabis-based medicines and/or pure consumer products containing cannabidiol may have their securities admitted to the Official List if they have the appropriate Home Office licences and otherwise satisfy the criteria for listing. They will however also have to satisfy the FCA that the entirety of their operations, including their supply chain, are UK-based.
  • Not all licences are equal and companies with cannabis-related activities lawfully operated overseas may have their securities admitted to the Official List only if the FCA is satisfied the activities are also lawful in the UK and that the business does not give rise to any money laundering offence under the Proceeds of Crime Act 2002 (POCA) (and they otherwise satisfy the criteria for listing). This is a high threshold and will require the applicant company to obtain legal opinions on the details of overseas activities including clear identification of the activities and their purpose, confirmation of the legality of the activities in the respective jurisdiction and in the UK, information on the jurisdiction’s licensing system and the company’s track record.
  • In respect of any potential listing application, early engagement with the FCA is key and companies should be pro-active in bringing to the attention of the FCA any areas of legal uncertainty in order to expedite the eligibility review.

The FCA is quick to point out that its technical note may not be relied upon as guidance on POCA, which of course is the huge area of concern for investors in CRBs, but the proposed blanket application of additional due diligence to all such businesses looking to list in the UK speaks to the FCA’s assessment of the risk these businesses may pose: the FCA will normally only ask for this level of due diligence in exceptional cases where they think there may be a high risk that admission of the applicant’s securities may be detrimental to investors’ interests.

As the FCA notes in its introduction, this new guidance is designed to aid interpretation of the Listing Rules and related legislation but it also serves to put potential investors in CRBs on notice of the risks involved. An investor in an unlisted CRB in the UK or a CRB listed in an overseas jurisdiction may commit a money laundering offence if they receive or deal with income from an aspect of the business which is considered unlawful in the UK only if they know or suspect that the income represents the proceeds of a crime. This latter element is designed to protect the unwitting who may handle property which is in fact the proceeds of crime about which they had no knowledge or suspicion. Suspicion however is a very low bar for an individual to reach before criminal liability might be engaged and the FCA’s guidance and clear stance will make it harder for an investor to argue that they did not suspect the income they received was the proceeds of crime when the potential risks have been so clearly sign posted.

Further Information

For advice on the issues raised in this blog please contact a member of our team and see our further blogs and news stories in ‘Medical Cannabis: Licensing and Investment Insights’.


About the author

Nicola Finnerty is a Partner in our Criminal Litigation team and a leading expert in white collar and business crime, proceeds of crime & asset forfeiture. Over the last 25 years she has been involved in many of the most high-profile, complex criminal and regulatory investigations and prosecutions, both in the UK and in matters which span multiple jurisdictions. Her expertise includes money laundering, fraud & bribery and corruption along with being regularly consulted by individuals and institutions in the regulated sector in respect of the Money Laundering Regulations 2017. Nicola represents high net worth individuals, multi nation corporate clients, financial institutions and professional firms in investigations and proceedings brought by UK enforcement agencies.


Latest Blogs & News

Overseas Production Orders: Companies should prepare for new powers to gather electronic data

The Crime (Overseas Production Orders) Act 2019 (COPOA) was enacted three years ago to give law enforcement agencies the power to directly obtain electronic data from service providers based outside the UK for the purpose of preventing, detecting and investigating serious crimes through the use of Overseas Production Orders (OPOs).

Acting to stop harm: the FCA and Appointed Representatives

On 13 May 2022, the FCA published a final refusing Alexander Jon Compliance Consulting Ltd.’s (“AJCC”) application for authorisation to provide regulatory hosting services. There is no specific definition of what a regulatory host is, but the FCA generally regards it as a commercial arrangement whereby an authorised Principal firm appoints and oversees a number of unconnected Appointed Representatives (“ARs”) which operate across a range of markets. 

The rule of law in Ukraine during martial law: Review of changes to the criminal process

We are delighted to present, as a guest blog, the thoughts and views of Dr Valentyn Gvozdiy, managing partner of Golaw in Kyiv. Dr Gvozdiy outlines the significant changes to criminal procedure that have been heralded by the Russian invasion of his country and the subsequent adoption of martial law.

Cross-Border Criminal Law Conference 2022: Individual and Corporate Accountability for International Crimes

On Thursday 5 May, Kingsley Napley hosted the 4th annual Cross-Border Criminal Law Conference, which focused on individual and corporate accountability for international crimes.

Health and Safety Quarterly Update – Q1 2022

This quarterly update provides a summary of a selection number of news stories relating to health and safety investigations and prosecutions, published in the period January - March 2022.

National Security and Investment Act 2021 – an expansive approach to liability

Whilst it is anticipated that prosecutions under the National Security and Investment Act 2021 (‘the Act’) will be exceptionally rare, the criminal sanctions set out in it are explicitly framed to create a “sufficiently robust deterrent to ensure compliance.” The provisions punish corporates and individual officers who connive or consent to commit an offence, as well as individual officers who are negligent (s.36). In addition, they are also extra-territorial (s.52), meaning that the scope of liability is particularly wide-ranging.

Environmental Law Quarterly Update Q1 - 2022

This quarterly environmental law update provides a summary of news stories in the period January 2022 – March 2022

KN's Cross Border Criminal Law Conference on 5 May 2022 | Panel Discussion: 20 years since the Pinochet case – the current state of universal jurisdiction in the UK

The Prime Minister recently committed the UK’s support to achieving justice in respect of the war crimes allegations arising out of the Ukraine conflict. The conflict and associated allegations raise questions over the UK’s commitment and ability to bring prosecutions under the doctrine of “universal jurisdiction”. Universal jurisdiction describes the jurisdiction that is available in the national courts of many countries to prosecute individuals for the most serious international crimes, even if those crimes occurred abroad and neither the defendants nor victims have any connection to that country. Why only a few such prosecutions have taken place in the UK will be the topic of one of two panel discussions at Kingsley Napley’s Cross Border Criminal Law Conference on 5 May 2022.

International Criminal Law Quarterly Round-Up: Q1 2022

This quarterly international criminal law update provides a summary of the news stories in the period January – March 2022. The relevance of international criminal law has been tragically highlighted by the current events in the Ukraine. This fast moving event has been covered below, along with a number of other international criminal law updates.

US rap artists are backing legislation to keep lyrics out of courtrooms –is it time for UK artists to do the same?

News broke last month that megastars Jay-Z, Meek Mill, Big Sean, Kelly Rowland and Fat Joe (among others) were supporting the introduction of a New York state law that aims to prevent the prosecution using rap lyrics in criminal trials.

Is Russia now facing suspension from INTERPOL?

On 28 February 2022, the UK Home Secretary Priti Patel announced to parliament that the UK would be ‘leading all international efforts’ to suspend Russia’s membership of INTERPOL.  

This came moments before the Ukrainian minister of internal affairs, Denis Monastyrsky, made a public statement demanding Russia’s immediate expulsion from the organisation for “violating its basic principles and massive misuse of tools and services to cover up its crimes and persecute political enemies, particularly in Ukraine.”

International prisoner transfer: serving a sentence back in the UK

The news is never short of horror stories involving travellers who find themselves detained in a foreign country. This is sadly a reality for thousands of British citizens who, for a variety of reasons, are being held in a prison abroad.

A new Economic Crime Bill and the accelerated introduction of a Register of Overseas Entities

A new bill will be put forward to parliament tomorrow with the aim of increasing transparency of ownership of property in the UK. The introduction of this new Economic Crime (Transparency and Enforcement) Bill has been expedited following the sanctions announced last week, however the drive for change began over five years ago and that it is finally coming to fruition will be welcomed by many.


Extradition post-Brexit: the Irish questions answered

On 16 November the CJEU delivered its judgment following the publication of the Advocate General’s opinion on the UK-Ireland extradition questions which we wrote about here. The decision concerned the mechanisms for extradition to the UK from Ireland in two scenarios (1) under the terms of the withdrawal agreement from 1 February to 31 December 2020 and (2) under the EU-UK Trade and Cooperation Agreement (“TCA”) from 1 January 2021.

The judgment confirms the AG’s Opinion that Ireland is bound by the withdrawal agreement and the TCA (“the agreements”) in respect of extradition arrangements with the UK and accordingly extradition from Ireland to the UK post-Brexit will continue under those terms.

The emergence of the private medical cannabis market and the risks of private prescriptions

In September 2020, the first NHS prescription for cannabis medicine was issued to Billy Caldwell. This brought hope to him, his family and so many others that this medicine would become readily available to those patients who so desperately need it.

Review of recent corporate manslaughter cases: Deco-Pak, Bosley Mill, Aster Healthcare

This blogs considers the recent corporate manslaughter conviction of Deco-Pak and two other recent corporate manslaughter cases, Bosley Mill and Aster Healthcare and what they tell us about the current approach to this offence. In January 2022 a garden supplies firm, Deco-Pak was found guilty of corporate manslaughter following a fatal accident at the Deco-Pak premises in Hipperholme, West Yorkshire on 14 April 2017.

What is the Medical Cannabis (Access) Bill?

The Medical Cannabis (Access) Bill (the ‘Bill’) aims to enable patients in England to access cannabis-based medicinal products (‘CBMPs’), such as nabiximols, more freely on the NHS. Although English law was changed in November 2018 to allow specialist doctors to prescribe cannabis (we have blogged about this here), very few people have been able to access NHS prescriptions which has left patients paying thousands of pounds a month for private prescriptions or unable to obtain treatment altogether. There are approximately 10,000 private prescriptions for CBMPs in the UK. In a paper published by BMJ Open in 2020, Professor David Nutt et. al. reported that thousands of UK patients were self-medicating with illicit cannabis-based products.

FCA as gatekeeper of UK crypto AML regime: two years in

On 10 January 2020, the Financial Conduct Authority (FCA) became the anti-money laundering (AML) and counter-terrorist financing (CTF) supervisor for UK cryptoasset firms. Two years in, how effectively is it performing its role as the gatekeeper of the new registration regime?

Medicinal Cannabis – Where Are We Now?

Guest author Edward Henry QC, of Mountford Chambers, considers the ongoing issues regarding access to medicinal cannabis, specifically relating to the treatment of children, in the United Kingdom (UK).

Environmental Law Quarterly Update - Q4 2021

This quarterly environmental law update provides a summary of news stories published in the period October – December 2021.

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Skip to content Home About Us Insights Services Contact Accessibility