Over the last decade, many states have passed laws allowing for the medical and/or recreational use of marijuana/cannabis; however, marijuana remains restricted as a Schedule I drug at the federal level. This has presented challenges within the financial services industry as to how to navigate interactions with prospects or clients who derive income from Marijuana Related Businesses (MRB). Clients or prospects involved in farming, distribution, marketing or sales, or whose income is derived from an MRB will not be permitted by Cetera due to current federal restrictions.
Another consideration is clients/prospects with income derived from the hemp industry. While hemp is excluded from the definition of marijuana, there are stringent laws and regulations that require enhanced due diligence by the firm. It is important to speak with the Prosperity Network OSJ prior to establishing an account for a client in the hemp industry.
On Cetera’s most recent supervision & operations call clarification was provided that Cetera Advisors representatives are not permitted to establish or maintain accounts for any individual who has income derived from MRBs or “indirect” marijuana businesses. This includes primary or secondary income sources. For example, if a client has a federally legal source of income as their primary source but has a secondary source of income from a MRB, they would not be permitted to open or maintain an account.
Cetera defines an indirect marijuana business as “a firm that derived any of its gross revenue for the previous business year (or, if the firm is a start-up, projects to derive any of its gross revenue for the next business year) from sales to Direct Marijuana Businesses or products or services that could reasonably be determined to aid in the use, growth, distribution, enhancement or other development of marijuana.”
Example of an Indirect Marijuana Business (MRB) :
- A business that sells smoking devices, pipes, bongs, inhalants or other products primarily designed, intended or marketed to facilitate marijuana consumption.
Examples of MRB derived income:
- Job titles such as “dispensary manager," “cultivation technician," or “bud tenders."
Who is not included:
- Individuals who own securities in the marijuana industry are permitted to maintain accounts. However, marijuana-related securities may not be able to be held in an account with Cetera Advisors.
If a current client is identified as receiving income derived from an MRB or indirect marijuana business, Cetera generally would not allow the client to continue to maintain accounts with the firm. If you think a client may be receiving income from one of these sources, please reach out to the Prosperity Network Compliance Team as soon as possible. We will partner with you and Cetera to determine if any action is necessary. The “fire the client” procedure may need to be completed to have accounts moved/closed if it is determined to be against firm policy.
If you have any questions, please reach out to the Prosperity Network Compliance Team:
compliance@prosperityadvisors.com or call 913-529-5500 Option 1.
The full policy can be located in the compliance manual in Pinpoint. See CA RRM 11.3.7 Cannabis/Marijuana Related Clients or Accounts.
Internal Use Only