Robert Celt
New Member
As financial institutions look to provide banking services to marijuana businesses, Wall Street investors are beginning to view the industry as the next Silicon Valley, despite enhanced compliance scrutiny from regulators.
"Banking is a real issue, so being a public company, we have to put standard operating procedures in place that make it auditable so that an auditor can stamp off on it," Mike Nahass, director of operations for Terra Tech, a cannabis-focused agriculture company, told CU Times. "We have that challenge of checks and balances. The problem is the government is forcing people in this industry to stay in the black market. It doesn't make sense."
Nahass, a former senior vice president and complex manager at Morgan Stanley, added, "If they would just allow the banks to accept the deposits ... the fear they have is the money is coming from a source or a person that is not real."
Terra Tech was one of the first companies with ties to the marijuana industry to go public. When it went public, there were only five public companies with ties to the industry; now, there are more than 300, according to Nahass.
Going public with a marijuana related business, or MRB, came with its own set of challenges for Terra Tech.
"We had to make it compliant for what we needed to do for Wall Street," Nahass explained. "It was a lot of work with a myriad of consultants and lawyers and getting everything right."
He said Wall Street was apprehensive of Terra Tech's move to go public. The shares hit a high of $1.14 and saw lows in the single digits.
"It's been very interesting, to say the least, but we did it because we are the first public company that is a retail dispensary," he added.
Cash intensive businesses, such as ones with ties to the marijuana industry, carry risks associated with not having access to financial services. That's why the slow move toward banking MRBs has come at a cost, according to attorney Martin Kenney, managing partner for Martin Kenney & Co. His firm was instrumental in working with Colorado's Fourth Corner Credit Union in building its compliance program.
"Cash is dangerous. It needs to get off the streets," he said.
"We looked upon [assisting Fourth Corner] as something good, because of the social good associated with making sure that people are complying with regulations involved, the law and also the public safety issue that portends the cannabis banking," Kenney continued. "If we don't start banking the hundreds of millions, now billions, of dollars floating around America's streets in locally lawful cannabis sales, then there are going to be problems of violence and robberies and extortion involving cash."
Nahass reinforced his point, stating the marijuana industry needs to be regulated.
"Regulate the banking industry and force people to put the money in the bank because then you know where the money comes from," he said of the need for the enhanced scrutiny.
Nahass is not alone in his quest for banking services for companies tied to the marijuana industry. Another former Wall Street investment banker, Steve Berg, said the struggle between state and Federal government regulations keep Open Vape, where he serves CFO, on its toes to stay compliant.
Open Vape is a Denver-based company that concentrates on cannabis oil products. Its signature product is a portable vaporizer pen that's used in conjunction with prefilled cannabis oil cartridges.
"Many banks, while they are very interested in servicing the cannabis industry, are simply not prepared to take on the extensive burdens that have been put forth, and therefore access to banking services in the industry remains a challenge," Berg said.
Berg said his interest in the industry came as he looked for a way to merge his love of banking and financial services with supporting a social good.
He found that in the marijuana industry, and became involved in The ArcView Group, a company that connects investors with entrepreneurs. It was through his involvement in ArcView that he connected with Open Vape.
The new platform Hypur, a compliance tool for cash-intensive businesses, could help CUs serve the marijuana industry.
"Our growth trajectory, in some ways, matches the evolution of cannabis markets," Berg said, adding that the adoption of state laws allowing for medical and recreational marijuana use has been one of the biggest growth drivers.
"We are certainly the beneficiary of that trend," he added.
That growth has largely been the reason for investors to seek out innovative companies in the marijuana space. ArcView has grown to support 500 accredited investors and dozens of companies that have pitched to marijuana business investors. Additionally, ArcView has helped provide $64 million to more than 100 companies since its inception, according to Berg.
Berg equated the current interest in the marijuana industry to that of the interest in Silicon Valley for its technology start-ups.
"The progress of the network mirrored the progress in [the tech industry] during the time frame of 2010 'til now," he said. "It's emblematic of how much more comfortable investors are now in putting money into this space."
Yet it is not just former Wall Street investors who are looking at the marijuana industry. In December 2015, Merrill Lynch published an informational report that outlined the industry for potential investors. It discussed a myriad of ways the industry is affecting the medical landscape and delved into the therapeutic benefits of cannabinoid usage.
Merrill Lynch said more than one million people currently use medical marijuana and estimated the industry's worth at $2.9 billion. The report reviewed the potential uses for medical marijuana, including its efficacy in arresting seizures and use in pain management, as well as its weight control benefits for AIDS patients.
As debates over the merits of medical marijuana continue, its acceptance in almost two dozen states has brought that debate to the forefront of a national discussion.
"It's gone well beyond growing cannabis in your garage," Nahass said. "It's no longer underground."
Terra Tech has eight licenses in Nevada, four retail facilities, two growing facilities and two production facilities.
While growth is a good thing for any public company, Nahass said he is concerned about the taxes Terra Tech has to pay.
"Our tax rate is going to be enormous but we hope they are going to loosen up on that," he said. "The challenge we have is the cash. We've got systems in place and made the procedure auditable, so that anyone can look at our books and see we did this or sorted this, our tax rate will be higher until we solve this issue [of banking MRBs], but if more people like that get into the business, it will be a lot easier to maintain, it would be a lot easier to supervise and no one will have to worry about whether the black market exists."
The regulators could then go after companies that are not playing by the rules, because there would be "enough money in taxation to pay for all the people they would have to hunt down that are doing it wrong," he added.
"We are honest, we report everything and we do everything above board," he said.
Still, the wheels of change are often slow, Berg pointed out.
"There has been considerable progress for allowing banks to operate and provide services to cannabis companies, but there's much more progress that's needed," he said.
In the meantime, companies such as Open Vape and Terra Tech spend tremendous funds and hours complying with federal and state guidelines.
"Adherence to state and all regulations as it pertains to our company is the highest priority for us," Berg said. "It's not always easy. Each state has its own regulatory regime, and while there are similarities, there are some important differences. We invest a tremendous amount of resources into making sure we adhere to the myriad of regulatory and compliance requirements across all jurisdictions in which we operate."
Berg also called on the efficacy of the current regulatory landscape.
"There has been considerable progress in banking and in making banking, financial and merchant services available to cannabis companies," he said. "If you're going to allow these companies to exist legally, logic would dictate that you would allow them to avail themselves to the basic services that every company needs to survive and operate. That includes banks. By including banks, you strengthen the tools for regulatory oversight, because you have a very clear line of sight to where money is flowing."
For now, investments in the marijuana industry continue to excite Wall Street investors.
"Everybody in this industry wants to be like Starbucks and be on every corner," Nahass said.
News Moderator: Robert Celt 420 MAGAZINE ®
Full Article: Wall Street Banks On Pot
Author: J. Daniel Young
Contact: Credit Union Times
Photo Credit: None found
Website: Credit Union Times
"Banking is a real issue, so being a public company, we have to put standard operating procedures in place that make it auditable so that an auditor can stamp off on it," Mike Nahass, director of operations for Terra Tech, a cannabis-focused agriculture company, told CU Times. "We have that challenge of checks and balances. The problem is the government is forcing people in this industry to stay in the black market. It doesn't make sense."
Nahass, a former senior vice president and complex manager at Morgan Stanley, added, "If they would just allow the banks to accept the deposits ... the fear they have is the money is coming from a source or a person that is not real."
Terra Tech was one of the first companies with ties to the marijuana industry to go public. When it went public, there were only five public companies with ties to the industry; now, there are more than 300, according to Nahass.
Going public with a marijuana related business, or MRB, came with its own set of challenges for Terra Tech.
"We had to make it compliant for what we needed to do for Wall Street," Nahass explained. "It was a lot of work with a myriad of consultants and lawyers and getting everything right."
He said Wall Street was apprehensive of Terra Tech's move to go public. The shares hit a high of $1.14 and saw lows in the single digits.
"It's been very interesting, to say the least, but we did it because we are the first public company that is a retail dispensary," he added.
Cash intensive businesses, such as ones with ties to the marijuana industry, carry risks associated with not having access to financial services. That's why the slow move toward banking MRBs has come at a cost, according to attorney Martin Kenney, managing partner for Martin Kenney & Co. His firm was instrumental in working with Colorado's Fourth Corner Credit Union in building its compliance program.
"Cash is dangerous. It needs to get off the streets," he said.
"We looked upon [assisting Fourth Corner] as something good, because of the social good associated with making sure that people are complying with regulations involved, the law and also the public safety issue that portends the cannabis banking," Kenney continued. "If we don't start banking the hundreds of millions, now billions, of dollars floating around America's streets in locally lawful cannabis sales, then there are going to be problems of violence and robberies and extortion involving cash."
Nahass reinforced his point, stating the marijuana industry needs to be regulated.
"Regulate the banking industry and force people to put the money in the bank because then you know where the money comes from," he said of the need for the enhanced scrutiny.
Nahass is not alone in his quest for banking services for companies tied to the marijuana industry. Another former Wall Street investment banker, Steve Berg, said the struggle between state and Federal government regulations keep Open Vape, where he serves CFO, on its toes to stay compliant.
Open Vape is a Denver-based company that concentrates on cannabis oil products. Its signature product is a portable vaporizer pen that's used in conjunction with prefilled cannabis oil cartridges.
"Many banks, while they are very interested in servicing the cannabis industry, are simply not prepared to take on the extensive burdens that have been put forth, and therefore access to banking services in the industry remains a challenge," Berg said.
Berg said his interest in the industry came as he looked for a way to merge his love of banking and financial services with supporting a social good.
He found that in the marijuana industry, and became involved in The ArcView Group, a company that connects investors with entrepreneurs. It was through his involvement in ArcView that he connected with Open Vape.
The new platform Hypur, a compliance tool for cash-intensive businesses, could help CUs serve the marijuana industry.
"Our growth trajectory, in some ways, matches the evolution of cannabis markets," Berg said, adding that the adoption of state laws allowing for medical and recreational marijuana use has been one of the biggest growth drivers.
"We are certainly the beneficiary of that trend," he added.
That growth has largely been the reason for investors to seek out innovative companies in the marijuana space. ArcView has grown to support 500 accredited investors and dozens of companies that have pitched to marijuana business investors. Additionally, ArcView has helped provide $64 million to more than 100 companies since its inception, according to Berg.
Berg equated the current interest in the marijuana industry to that of the interest in Silicon Valley for its technology start-ups.
"The progress of the network mirrored the progress in [the tech industry] during the time frame of 2010 'til now," he said. "It's emblematic of how much more comfortable investors are now in putting money into this space."
Yet it is not just former Wall Street investors who are looking at the marijuana industry. In December 2015, Merrill Lynch published an informational report that outlined the industry for potential investors. It discussed a myriad of ways the industry is affecting the medical landscape and delved into the therapeutic benefits of cannabinoid usage.
Merrill Lynch said more than one million people currently use medical marijuana and estimated the industry's worth at $2.9 billion. The report reviewed the potential uses for medical marijuana, including its efficacy in arresting seizures and use in pain management, as well as its weight control benefits for AIDS patients.
As debates over the merits of medical marijuana continue, its acceptance in almost two dozen states has brought that debate to the forefront of a national discussion.
"It's gone well beyond growing cannabis in your garage," Nahass said. "It's no longer underground."
Terra Tech has eight licenses in Nevada, four retail facilities, two growing facilities and two production facilities.
While growth is a good thing for any public company, Nahass said he is concerned about the taxes Terra Tech has to pay.
"Our tax rate is going to be enormous but we hope they are going to loosen up on that," he said. "The challenge we have is the cash. We've got systems in place and made the procedure auditable, so that anyone can look at our books and see we did this or sorted this, our tax rate will be higher until we solve this issue [of banking MRBs], but if more people like that get into the business, it will be a lot easier to maintain, it would be a lot easier to supervise and no one will have to worry about whether the black market exists."
The regulators could then go after companies that are not playing by the rules, because there would be "enough money in taxation to pay for all the people they would have to hunt down that are doing it wrong," he added.
"We are honest, we report everything and we do everything above board," he said.
Still, the wheels of change are often slow, Berg pointed out.
"There has been considerable progress for allowing banks to operate and provide services to cannabis companies, but there's much more progress that's needed," he said.
In the meantime, companies such as Open Vape and Terra Tech spend tremendous funds and hours complying with federal and state guidelines.
"Adherence to state and all regulations as it pertains to our company is the highest priority for us," Berg said. "It's not always easy. Each state has its own regulatory regime, and while there are similarities, there are some important differences. We invest a tremendous amount of resources into making sure we adhere to the myriad of regulatory and compliance requirements across all jurisdictions in which we operate."
Berg also called on the efficacy of the current regulatory landscape.
"There has been considerable progress in banking and in making banking, financial and merchant services available to cannabis companies," he said. "If you're going to allow these companies to exist legally, logic would dictate that you would allow them to avail themselves to the basic services that every company needs to survive and operate. That includes banks. By including banks, you strengthen the tools for regulatory oversight, because you have a very clear line of sight to where money is flowing."
For now, investments in the marijuana industry continue to excite Wall Street investors.
"Everybody in this industry wants to be like Starbucks and be on every corner," Nahass said.
News Moderator: Robert Celt 420 MAGAZINE ®
Full Article: Wall Street Banks On Pot
Author: J. Daniel Young
Contact: Credit Union Times
Photo Credit: None found
Website: Credit Union Times
