Securities Brokers have (Relatively) Open Arms to Marijuana Businesses

By Alison Jimenez, Dynamic Securities Analytics, Inc. and Steven Kemmerling, MRB Monitor

Securities Brokers Engaging with Marijuana Businesses

SAR Terminology Table_v2Forty-one securities brokers filed Suspicious Activity Reports (“SARs”) regarding Marijuana Related Businesses from February 2014 through July 1, 2015. The count includes securities firms that terminated marijuana accounts. Securities brokers accounted for 8% of the financial institutions filing marijuana SARs. The marijuana-related SAR data was provided to Dynamic Securities Analytics (“DSA”) by FinCEN per a FIOA request.

SEC Regulated Financial Institutions

We analyzed marijuana SAR filings by financial institutions (“FIs”) whose primary regulator is the SEC (i.e., broker/dealers, investment advisors, stock exchanges, and mutual funds). Our analysis found that SEC-regulated financial institutions:

  • On average filed 5.5 marijuana related SARs versus 11 on average filed by Depository Institutions (among FIs filing marijuana SARs)
  • Had the lowest percentage of Priority and Terminations SARs (18% combined) filings compared to the other financial institution types (47%)
  • The most stark contrast was with OCC-supervised national banks, which filed 74% Termination SARs and only 20% Limited SARs

In summary, these numbers seem to indicate a greater willingness by SEC-regulated FIs to work with and service marijuana-related businesses compared to FIs supervised by other federal regulators.

SEC vs DI SAR Types

Marijuana Related Securities

The Wall Street Journal reported that the SEC allowed share registration for a company “whose business model includes the cultivation and sale of marijuana.” Furthermore, the Marijuana Index, which tracks listed companies in the marijuana sector, includes 150 companies in its Global Composite Constituents Index with a combined market value of $5.6 billion. The SEC also released an Investor Alert regarding Marijuana Related Investments.