Primary Market Bulletin 35

Welcome to the 35th edition of the Primary Market Bulletin (PMB).

In this special edition we cover our proposed approach to assessing eligibility and listing applications for companies with cannabis-related activities. This is an important consultation and we would greatly appreciate and look forward to your feedback.

Listing applicants with cannabis-related businesses - update

On 18 September 2020, in response to queries from companies carrying on cannabis-related activities interested in listing in the UK, we made a statement on our approach to assessing these applications.

In PMB 31 we said that a guidance consultation would follow. We can now set out our proposed approach in a new technical note, Primary Market/TN/104.1 Listing applicants with cannabis-related businesses, to be included on our Knowledge Base.

The proposed technical note confirms that we will not admit the securities of a company with any recreational cannabis business, directly or indirectly, to the Official List. This is because the possession and supply of cannabis for recreational purposes are criminal offences in the UK. Proceeds from those activities, even where generated in jurisdictions where it is legal, are criminal property under the Proceeds of Crime Act 2002 (PoCA). Companies carrying on cannabis-related activities such as the development, production and sale of cannabis-based medicinal products (CBMPs) and products containing cannabidiol (CBD) may be admitted to the Official List provided that the criteria for listing are satisfied and we are satisfied that their business does not give rise to any money laundering offence under PoCA.

Due to the legal risks outlined in the technical note, we consider that additional due diligence is necessary for companies carrying on cannabis-related activities. The scope and extent of the due diligence will be determined on a case by case basis, and we will consider the specific risks presented by the new applicant. This may include evidence regarding relevant licenses and appropriate legal opinions. Further details are set out in the technical note. We advise these companies and their advisers to be pro-active and approach us with any questions about the legality of the company’s operations or areas of significant legal uncertainty as early as possible. In our experience, the absence of this early engagement has the effect of prolonging the eligibility review.

The technical note guidance is only provided in the context of our assessment of whether the company’s business and activities would be detrimental to the interests of investors under s. 75(5) of the Financial Services and Markets Act 2000.

It is not guidance and is not in any way to be relied on as guidance, on the application of the Proceeds of Crime Act 2002.

It is not legal advice and a company should seek their own independent legal advice to ensure they are compliant with any relevant legislation.    

Consultation and proposed changes to the Knowledge Base

We are consulting on the addition of 1 new technical note to our Knowledge Base.

Category: Eligibility for listing

Primary Markets/TN/104.1 Listing applicants with cannabis-related businesses.

We consider that the proposal has regard to the 5 LRRA principles, that regulatory activities should be carried out in a way which is:

• transparent
• accountable
• proportionate
• consistent 
• targeted only at cases in which action is needed

We have had regard to the Regulators’ Code, particularly the requirement for proportionate and targeted regulatory activity. The aim of the amendment to the Knowledge Base in this PMB is to update guidance to issuers and primary market practitioners.

We are confident that our proposal does not give rise to equality and diversity implications, but we welcome comments should you have any concerns.

To access the guidance referred to in this edition of the PMB, see our website: PMB No.35 Guidance Consultation.