Credit Suisse Group AG has indicated it will no longer perform transactions in shares of cannabis firms with U.S. operations or hold such shares on behalf of clients, according to a Reuters report citing a cannabis industry executive and other industry sources.
The bank, which was one of few banks that would trade cannabis stocks for U.S. clients and hold those shares as a custodian, has neither confirmed the report nor provided comment.
Abner Kurtin, CEO of cannabis company Ascend Wellness Holdings Inc, said that when the bank 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.”
A custodian bank holds clients’ securities for safekeeping, to prevent them from being lost or stolen, the report says. The bank also collects dividends and handles other corporate actions, playing an important role in assisting investors to hold shares in companies.
The cannabis industry represents a legal risk for investment banks as the plant remains outlawed under U.S. federal law. Companies based in Canada with a footprint in the U.S. are traded on the major stock exchanges in both their home nation and the U.S.
Credit Suisse’s compliance and risk management procedures have come under fire after the bank lost at least $4.7 billion from the collapse of Archegos and the suspension of funds linked to insolvent supply chain finance company Greensill, according to Reuters.
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