Beginning November 8, JPMorgan Chase & Co will no longer let its prime brokerage clients buy certain U.S. cannabis-related securities, according to a letter outlined by Reuters. The move follows similar actions by Credit Suisse last May.
“J.P. Morgan (JPMS) has introduced a framework that is designed to comply with U.S. money laundering laws and regulations by restricting certain activities in the securities of U.S. Marijuana Related Businesses.” — J.PMorgan Chase & Co., in a letter, via Reuters
As of next week, the bank will not allow new purchases or short positions in cannabusinesses, but clients with existing positions will be allowed to liquidate them, the report says. The new rules apply to companies with U.S. operations that are not listed on the Nasdaq, the New York Stock Exchange (NYSE), or the Toronto Stock Exchange and have a “direct nexus to marijuana-related activities,” the letter notes.
The NYSE and Nasdaq allow some cannabis firms — including Canadian companies that do not sell cannabis in the U.S. — to list but both exchanges prohibit listing companies that directly cultivate or sell cannabis, which remains illegal under federal U.S. law.
Abner Kurtin, CEO of cannabis company Ascend Wellness Holdings Inc, said that when Credit Suisse pulled its custodian services on cannabis stocks, “a number of large investors in the space lost their ability to custodian the stocks” which “led to a significant selloff.”
In September, Cowen and Co, another U.S. bank active in the cannabis trading space, raised its cash margin requirements for all cannabis-related trades on its platform, according to a letter sent to clients outlined by Reuters.