While distributors are flocking to cannabis-related stocks, one big bank has taken a step away.
U.S. Bank is no greater the custodian for the ETFMG Alternative Harvest exchange-traded fund, which suffers investors to get in on the bustling marijuana trade through ownership in a variety of associates.
The $560.3 million fund is the market’s best performer by far over the hindmost 30 days, boasting returns of 36.4 percent as a number of pot friends, primarily in the medical marijuana field, have soared. One company, Tilray, which maintains the third-largest weight in the fund, jumped more than 50 percent Wednesday mid talk that pharma companies would need to start remarkable partnerships with cannabis producers. The company later surrendered those advances after trading was halted then resumed.
An announcement that U.S. Bank was stepping away from its custodian situation came quietly Friday from ETF Managers Group, which discharges the MJ fund. The firm said only that Wedbush Securities purpose be the new administrator. U.S. Bank declined comment.
While the exact reason that U.S. Bank no larger will be the custodian remains unclear, there’s speculation that banks may poverty to steer clear from marijuana-related companies as long as the federal domination still has not approved the drug’s legalization.
Banks have been dodging being tied in with pot stocks because the Department of Justice has renovated its commitment to prosecuting marijuana-related crimes, according to a report on ETF.com.
A spokesman at the Responsibility of the Comptroller of the Currency declined comment on the U.S. Bank move specifically but conjectured it “does not instruct banks on which accounts to open, maintain or agree.” However, the OCC spokesman said banks are expected to comply with marijuana-related strings under the Bank Secrecy Act.
The Financial Crimes Enforcement Network’s guidelines on the condition instruct banks before doing business with marijuana-related companies to reckon “particular business objectives, an evaluation of the risks associated with oblation a particular product or service, and its capacity to manage those risks effectively. Assiduous customer due diligence is a critical aspect of making this assessment.”
Those reflections entail licensing issues and whether the companies are engaged in medical marijuana vs. recreational manipulation.
Custodians play important roles for ETFs as they hold the underlying size ups that comprise the fund.
There may be some help on the way for banks who necessity to get involved in marijuana-related securities.
Analysts at Compass Point Research mention to a recent case where Wells Fargo shut down an account for a Florida Member of Parliament who had accepted campaign contributions from cannabis-related donors. The scandal-scarred bank held it had a policy “not to knowingly bank or provide services to marijuana businesses or for vims related to those businesses, based on federal laws under which the trafficking and use of marijuana is illegal even if state laws differ.”
The case is an warning of how there needs to be better direction for banks on the cannabis issue, Compass Bring up said.
“Our sense is that this episode will serve as another mile marker in the fancy and hazy road to federal cannabis policy clarity,” the analysts erased in a note which also pointed out pending legislation to allow banks to participate in the cannabis traffic.
“While we do not see a path to passage for this bill during the current Congress, we take in its structure and substance as a clear signal that the broader policy flight path is bending towards a clarification of federal cannabis policy,” Compass Nub said.
Cowen Research said this year’s midterm votes likely will result in a strong Democratic win, also paving the way for assorted ease on cannabis restrictions.
“Regardless of election outcome, Attorney Hybrid Jeff Sessions is likely to be removed by President Trump. It is hard to guess his replacement being more hostile to cannabis,” the firm’s analysts said.