The burgeoning legal cannabis industry has seen a surge in IPOs and dealmaking. But financial advisers at some of the largest US wealth managers haven’t been permitted to allow their clients to buy and sell cannabis stocks — until recently.
Business Insider has learned that some of the biggest wealth management firms in the US — including Morgan Stanley, Bank of America, and Wells Fargo — have set up processes to allow financial advisers to invest on clients’ behalf in certain Canadian cannabis stocks.
In some cases, advisers at different firms can’t make the investment unless clients ask first. In others, advisers must get the firm’s pre-approval to make such a recommendation, and a decision is made on a case-by-case basis.
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Financial advisers at some of the biggest US wealth managers are slowly opening their doors to cannabis.
Wealth management firms including Wells Fargo, Merrill Lynch, and Morgan Stanley have started permitting their clients to access some Canadian cannabis stocks, Business Insider has learned. In some cases across these firms, the client has to come to their adviser to ask about an investment, or the adviser has to seek approval from the firm before making a recommendation.
The changes have come in recent months. Wells Fargo Advisors in August changed how it responds to client queries about cannabis investments, while Merrill Lynch started allowing recommendations of cannabis shares with “buy” ratings after Bank of America launched research coverage on a group of cannabis companies in April.
This shift underscores an evolving, still-complex environment for the intersection of cannabis and Wall Street. THC, the chief psychoactive component of cannabis, is federally illegal in the US. Yet there’s been an influx of family office and venture capital investment into parts of the industry, and Wall Street’s largest banks are starting to figure out how to serve cannabis-related companies. Eleven states and Washington, DC have now legalized marijuana for recreational use.
Wells Fargo Advisors now allows full-service financial advisers’ clients to invest in six pre-approved Canadian cannabis companies if the clients specifically request first, according to a person with direct knowledge of the matter. Canada legalized recreational cannabis in 2018.
The six companies all confine their THC-touching operations to Canada and other jurisdictions where it is federally legal and are listed on major US exchanges like the New York Stock Exchange or NASDAQ. That leaves US cannabis companies — listed on the Canadian Securities Exchange or traded over-the-counter — off the table.
And Wells Fargo’s financial advisers are not allowed to solicit the investment — the client has to ask.
The change to the policy came in August over what the person said was an uptick in demand from clients. The broader San Francisco-based bank also has a working group within its compliance department developing its approach to cannabis.
Bank of America’s Merrill Lynch Wealth Management began allowing financial advisers …read more
Source:: Business Insider