Credit Suisse has been informing its customers over the past several months that it will cease executing transactions in shares of cannabis companies or hold them on the customer’s behalf, in a broader move to tighten its risk management procedures.
According to Reuters, which cited a cannabis executive and other industry sources, Credit Suisse and several other major banks have pulled back their custodian support for clients that buy and sell cannabis-related stocks. The Swiss bank has told its customers that it will no longer conduct transactions related to US marijuana stocks, or hold them on their behalf.
With the cannabis industry booming over the past several years, custodian services such as the ones previously provided by Credit Suisse have helped clients hold shares in cannabis companies. However, despite a number of US states legalizing the recreational use of cannabis, the drug still remains illegal under federal law. This creates a significant legal risk for the few investment banks that are willing to associate with companies that produce or distribute marijuana.
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As of late, Credit Suisse has come under scrutiny by regulators, who accuse the Swiss bank of not imposing adequate risk control measures. Recently, the bank was caught in the midst of the Archegos collapse, which resulted in over $10 billion worth of losses for a number of major banks, including Credit Suisse, which lost at least $4.7 billion. The MSOS ETF, which tracks US cannabis stocks, has fallen by more than 20% since the beginning of February. Several major market players attribute the recent decline to Credit Suisse’s latest move, noted Reuters.
Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
