This transcript has been auto generated
1
00:00:00,600 --> 00:00:06,719
[Music]
2
00:00:03,600 --> 00:00:06,719
[Applause]
3
00:00:09,200 --> 00:00:13,599
welcome I'm your host Hillary Bricken and
4
00:00:11,480 --> 00:00:15,719
this is the Cannabis law Now podcast
5
00:00:13,599 --> 00:00:17,480
where we regularly discuss issues
6
00:00:15,719 --> 00:00:19,480
related to the Cannabis industry
7
00:00:17,480 --> 00:00:22,160
including investment day-to-day
8
00:00:19,480 --> 00:00:24,240
operational issues and potential reform
9
00:00:22,160 --> 00:00:26,080
on the horizon that will impact all
10
00:00:24,240 --> 00:00:27,450
cannabis businesses and investors in the
11
00:00:26,080 --> 00:00:28,960
United
12
00:00:27,450 --> 00:00:31,800
[Music]
13
00:00:28,960 --> 00:00:33,719
States welcome everybody on today's
14
00:00:31,800 --> 00:00:35,200
episode I have one of my esteemed
15
00:00:33,719 --> 00:00:37,960
colleagues here at hush Blackwell with
16
00:00:35,200 --> 00:00:40,079
us we have yupon Wong yupon based out of
17
00:00:37,960 --> 00:00:42,640
Denver how you doing I'm great Hillary
18
00:00:40,079 --> 00:00:45,320
how are you I'm doing well too and we
19
00:00:42,640 --> 00:00:48,160
have you on the podcast today to
20
00:00:45,320 --> 00:00:50,120
specifically talk about which may be the
21
00:00:48,160 --> 00:00:51,360
majority of cannabis companies unless
22
00:00:50,120 --> 00:00:52,920
they've really been paying attention
23
00:00:51,360 --> 00:00:54,520
they don't know about it but it's the
24
00:00:52,920 --> 00:00:57,760
application of the corporate
25
00:00:54,520 --> 00:01:01,079
transparency act to them their existing
26
00:00:57,760 --> 00:01:02,879
businesses new businesses joint ventures
27
00:01:01,079 --> 00:01:05,119
that they seek to start and before we
28
00:01:02,879 --> 00:01:06,880
get into the corporate transparency act
29
00:01:05,119 --> 00:01:08,960
which I'm going to call the CTA why
30
00:01:06,880 --> 00:01:10,600
don't you give us an our listeners a
31
00:01:08,960 --> 00:01:12,119
little bit on your background because
32
00:01:10,600 --> 00:01:14,320
you're a corporate m&a and securities
33
00:01:12,119 --> 00:01:16,320
attorney but what does that really mean
34
00:01:14,320 --> 00:01:17,720
in the context of serving your cannabis
35
00:01:16,320 --> 00:01:19,200
clients and just give us a little bit of
36
00:01:17,720 --> 00:01:21,720
a history of your practice before we
37
00:01:19,200 --> 00:01:24,680
launch into CTA yeah sure thanks again
38
00:01:21,720 --> 00:01:27,040
for having me so I have been practicing
39
00:01:24,680 --> 00:01:29,960
in the Cannabis field and also with hush
40
00:01:27,040 --> 00:01:32,280
Blackwell for 5 years prior to that my
41
00:01:29,960 --> 00:01:34,479
background was in General corporate law
42
00:01:32,280 --> 00:01:36,600
private Equity public and private
43
00:01:34,479 --> 00:01:39,159
Acquisitions Investments and so forth I
44
00:01:36,600 --> 00:01:41,280
was actually at a big US law firm in
45
00:01:39,159 --> 00:01:44,240
Shanghai where I was helping a lot of
46
00:01:41,280 --> 00:01:46,719
American companies invest into um you
47
00:01:44,240 --> 00:01:49,840
know Chinese the Chinese PE space a lot
48
00:01:46,719 --> 00:01:51,759
a lot of Biotech work I actually thought
49
00:01:49,840 --> 00:01:53,320
out Steve LaVine and Marshall at husch
50
00:01:51,759 --> 00:01:56,000
blackwell because I really wanted to get
51
00:01:53,320 --> 00:01:59,439
into cannabis and I interviewed them
52
00:01:56,000 --> 00:02:02,360
from China and here I am so yeah a
53
00:01:59,439 --> 00:02:04,119
little bit interesting story so yeah I
54
00:02:02,360 --> 00:02:05,719
kind of bring you know just a general
55
00:02:04,119 --> 00:02:07,439
corporate skill set to the Cannabis
56
00:02:05,719 --> 00:02:09,319
space since I've been at hush and in
57
00:02:07,439 --> 00:02:11,560
Denver I've done a lot of transactions
58
00:02:09,319 --> 00:02:13,319
for you know all the big names here in
59
00:02:11,560 --> 00:02:15,680
Colorado one of the highlights would
60
00:02:13,319 --> 00:02:17,280
definitely be uh the sale of Live Well
61
00:02:15,680 --> 00:02:19,319
to pharmacan a couple years ago which
62
00:02:17,280 --> 00:02:21,519
was at that point the biggest cannabis
63
00:02:19,319 --> 00:02:24,319
Steel in the nation at over a billion
64
00:02:21,519 --> 00:02:27,040
dollars so my specialty is generally an
65
00:02:24,319 --> 00:02:29,360
acquisition type work so selling and
66
00:02:27,040 --> 00:02:32,560
buying dispensaries licenses and that
67
00:02:29,360 --> 00:02:33,840
stuff and also Equity Investments we see
68
00:02:32,560 --> 00:02:36,239
that a little bit less of course in the
69
00:02:33,840 --> 00:02:38,080
Cannabis space but I also have kind of a
70
00:02:36,239 --> 00:02:39,920
a non-cannabis practice where I do a lot
71
00:02:38,080 --> 00:02:42,920
of similar types of work in other other
72
00:02:39,920 --> 00:02:44,480
Industries and I have to say cannabis is
73
00:02:42,920 --> 00:02:46,680
volatile it's been that way from the
74
00:02:44,480 --> 00:02:49,080
jump it's highly unpredictable at times
75
00:02:46,680 --> 00:02:51,720
arbitrary state-by-state Patchwork quilt
76
00:02:49,080 --> 00:02:53,480
of Regulation that sometimes undermines
77
00:02:51,720 --> 00:02:55,680
or definitely informs all of these
78
00:02:53,480 --> 00:02:57,400
transactions including the m&a the only
79
00:02:55,680 --> 00:03:00,560
thing I could think of that might be
80
00:02:57,400 --> 00:03:02,640
more volatile and scary and arious would
81
00:03:00,560 --> 00:03:04,280
be doing business in China and I I can
82
00:03:02,640 --> 00:03:06,560
say that because my last Law Firm had a
83
00:03:04,280 --> 00:03:08,040
big China practice and I do recall many
84
00:03:06,560 --> 00:03:09,560
years ago they were getting their forms
85
00:03:08,040 --> 00:03:12,959
rejected because they didn't fill them
86
00:03:09,560 --> 00:03:15,040
out in blue ink even though it did say
87
00:03:12,959 --> 00:03:17,519
blue or Black Ink on the form but on
88
00:03:15,040 --> 00:03:19,440
that day Black Ink wasn't being accepted
89
00:03:17,519 --> 00:03:20,920
so I can only imagine the volatility
90
00:03:19,440 --> 00:03:22,440
that you've seen in your past and that
91
00:03:20,920 --> 00:03:24,480
you're quite conditioned to be able to
92
00:03:22,440 --> 00:03:27,159
help cannabis companies I'll say it's
93
00:03:24,480 --> 00:03:29,519
very relationship based one of the deals
94
00:03:27,159 --> 00:03:31,560
I actually did was helping a state don't
95
00:03:29,519 --> 00:03:33,680
ENT rise which is an entity created by
96
00:03:31,560 --> 00:03:35,920
the communist government in the
97
00:03:33,680 --> 00:03:38,200
acquisition of a semiconductor
98
00:03:35,920 --> 00:03:40,400
manufacturer in the US this was right
99
00:03:38,200 --> 00:03:42,560
before the Trump presidency and probably
100
00:03:40,400 --> 00:03:46,080
one of the last deals of that nature
101
00:03:42,560 --> 00:03:47,680
that will ever be done so yeah wow yes I
102
00:03:46,080 --> 00:03:50,200
do think that China transactional
103
00:03:47,680 --> 00:03:52,159
attorney is fit to practice in the
104
00:03:50,200 --> 00:03:53,560
Cannabis industry in the US more than
105
00:03:52,159 --> 00:03:55,799
probably the majority of other
106
00:03:53,560 --> 00:03:57,959
candidates okay so let's talk about the
107
00:03:55,799 --> 00:04:00,799
CTA as a corporate lawyer and I have a
108
00:03:57,959 --> 00:04:03,360
corporate practice as well this is
109
00:04:00,799 --> 00:04:05,439
infecting our practices with our clients
110
00:04:03,360 --> 00:04:07,280
unless they're exempt wanting to start
111
00:04:05,439 --> 00:04:08,680
new entities or even if they began
112
00:04:07,280 --> 00:04:11,519
entities last year could potentially
113
00:04:08,680 --> 00:04:14,120
apply can you just give us an overview
114
00:04:11,519 --> 00:04:17,000
of the CTA assuming that a lot of these
115
00:04:14,120 --> 00:04:20,880
listeners maybe haven't even heard of it
116
00:04:17,000 --> 00:04:22,720
let alone delved in to its elements yeah
117
00:04:20,880 --> 00:04:24,880
sure I think so I'm just going to give
118
00:04:22,720 --> 00:04:27,880
you a little background the three
119
00:04:24,880 --> 00:04:31,039
biggest takeaways I would say are that
120
00:04:27,880 --> 00:04:33,919
one the act it came into effect January
121
00:04:31,039 --> 00:04:37,080
1st of this year it applies to entities
122
00:04:33,919 --> 00:04:38,919
created before and after the effective
123
00:04:37,080 --> 00:04:41,080
date and when I say entities I mean
124
00:04:38,919 --> 00:04:42,520
virtually every single kind of entity
125
00:04:41,080 --> 00:04:45,440
you're going to be working with
126
00:04:42,520 --> 00:04:48,280
corporations trusts limited Partnerships
127
00:04:45,440 --> 00:04:50,759
except for a few very narrow types of
128
00:04:48,280 --> 00:04:52,639
entities like common law trusts that are
129
00:04:50,759 --> 00:04:54,120
we don't see much in the Cannabis space
130
00:04:52,639 --> 00:04:55,919
your entity is probably going to be
131
00:04:54,120 --> 00:04:57,479
affected unless it there's an exemption
132
00:04:55,919 --> 00:04:59,840
which I'll talk about in a second the
133
00:04:57,479 --> 00:05:03,000
second most important thing is that this
134
00:04:59,840 --> 00:05:05,000
requires reporting of natural persons so
135
00:05:03,000 --> 00:05:06,960
when you're filing at a company you're
136
00:05:05,000 --> 00:05:09,199
going to have to list your individual
137
00:05:06,960 --> 00:05:11,800
beneficial owners doesn't matter if you
138
00:05:09,199 --> 00:05:13,800
own your you know your primary license
139
00:05:11,800 --> 00:05:16,280
entity through a number of llc's or
140
00:05:13,800 --> 00:05:18,360
Partnerships or whatnot it goes all the
141
00:05:16,280 --> 00:05:20,720
way to the top third most important
142
00:05:18,360 --> 00:05:23,080
thing is the timing aspect for entities
143
00:05:20,720 --> 00:05:25,039
created prior to this year you have
144
00:05:23,080 --> 00:05:27,080
until the end of the year to file this
145
00:05:25,039 --> 00:05:29,360
report and comply with the law if you're
146
00:05:27,080 --> 00:05:32,120
creating a new entity going forward you
147
00:05:29,360 --> 00:05:33,960
have 90 days to comply that means the
148
00:05:32,120 --> 00:05:36,199
first batch if you create entity in
149
00:05:33,960 --> 00:05:38,319
January and you haven't reported yet
150
00:05:36,199 --> 00:05:40,560
technically you're in breach of the act
151
00:05:38,319 --> 00:05:42,120
the CTA I'm sorry and then I guess I'm
152
00:05:40,560 --> 00:05:44,199
just looking a fourth one in and there
153
00:05:42,120 --> 00:05:46,199
are criminal penalties involved up to
154
00:05:44,199 --> 00:05:48,840
two years of imprisonment for a willful
155
00:05:46,199 --> 00:05:50,880
violation so this isn't just like a slap
156
00:05:48,840 --> 00:05:52,680
on the wrist there could be you know
157
00:05:50,880 --> 00:05:55,199
very strong potential
158
00:05:52,680 --> 00:05:56,360
penalties so I'm just going to keep
159
00:05:55,199 --> 00:05:58,360
moving forward a little bit of
160
00:05:56,360 --> 00:05:59,720
background this was actually created as
161
00:05:58,360 --> 00:06:02,080
past as part of the anti-money
162
00:05:59,720 --> 00:06:03,840
laundering Act of 2020 and the purpose
163
00:06:02,080 --> 00:06:05,080
you hear anti-money laundering in canvas
164
00:06:03,840 --> 00:06:06,639
you might be a little spooked the
165
00:06:05,080 --> 00:06:09,759
purpose of this was kind of in reaction
166
00:06:06,639 --> 00:06:11,680
to the Panama papers back in 2016 just a
167
00:06:09,759 --> 00:06:14,319
a concern by the US government and
168
00:06:11,680 --> 00:06:16,840
treasury with the particular use of us
169
00:06:14,319 --> 00:06:18,479
entities as shell companies for you know
170
00:06:16,840 --> 00:06:20,560
illicit activities including money
171
00:06:18,479 --> 00:06:22,080
laundering and all that good stuff
172
00:06:20,560 --> 00:06:23,919
unlike a lot of other countries you know
173
00:06:22,080 --> 00:06:26,080
our entity creation system is State
174
00:06:23,919 --> 00:06:28,039
based so there's no federal registry of
175
00:06:26,080 --> 00:06:29,800
beneficial owners it's Most states don't
176
00:06:28,039 --> 00:06:32,400
even require you to report your your
177
00:06:29,800 --> 00:06:35,120
owners just an incorporator so that's
178
00:06:32,400 --> 00:06:37,400
why Congress saw fit to pass this pass
179
00:06:35,120 --> 00:06:39,520
this law moving to a few few other
180
00:06:37,400 --> 00:06:42,120
Concepts there's kind of three things
181
00:06:39,520 --> 00:06:44,280
you need to report on one is the company
182
00:06:42,120 --> 00:06:46,800
itself the reporting company so like I
183
00:06:44,280 --> 00:06:47,960
said pretty much every single entity no
184
00:06:46,800 --> 00:06:49,319
matter where it is in your chain of
185
00:06:47,960 --> 00:06:51,319
ownership is going to be considered a
186
00:06:49,319 --> 00:06:54,199
reporting company unless it meets an
187
00:06:51,319 --> 00:06:56,319
exemption there are 23 exemptions most
188
00:06:54,199 --> 00:06:58,960
of them do not apply to the Cannabis
189
00:06:56,319 --> 00:07:01,080
industry they are for industries that
190
00:06:58,960 --> 00:07:04,000
are other wise regulated by treasury
191
00:07:01,080 --> 00:07:05,879
like private investment advisers Banks
192
00:07:04,000 --> 00:07:07,759
Commodities exchange act registered
193
00:07:05,879 --> 00:07:09,280
participants stuff like that so the
194
00:07:07,759 --> 00:07:11,759
biggest one though that would apply to
195
00:07:09,280 --> 00:07:13,759
the cab is called the large operating
196
00:07:11,759 --> 00:07:15,879
company exemption and that basically
197
00:07:13,759 --> 00:07:18,000
says if you're a large legitimate
198
00:07:15,879 --> 00:07:19,879
company with operations in the US then
199
00:07:18,000 --> 00:07:22,240
you don't have to report and the
200
00:07:19,879 --> 00:07:24,800
requirements for those are one you
201
00:07:22,240 --> 00:07:26,000
directly employ 20 employees and that's
202
00:07:24,800 --> 00:07:28,680
important because if you have an
203
00:07:26,000 --> 00:07:30,720
affiliate that that employs 20 employees
204
00:07:28,680 --> 00:07:32,560
it doesn't it doesn't count account
205
00:07:30,720 --> 00:07:34,680
number two is you filed the tax return
206
00:07:32,560 --> 00:07:36,599
in the past year showing 5 million or
207
00:07:34,680 --> 00:07:38,479
more in gross sales or assets I
208
00:07:36,599 --> 00:07:40,479
interpret that as basically line 1A on
209
00:07:38,479 --> 00:07:43,160
the relevant form three is you have a
210
00:07:40,479 --> 00:07:45,919
physical operating presence in the US I
211
00:07:43,160 --> 00:07:47,479
think that the second and third probably
212
00:07:45,919 --> 00:07:49,440
will not be an issue for most of our
213
00:07:47,479 --> 00:07:51,199
larger cannabis uh clients especially
214
00:07:49,440 --> 00:07:52,919
having a physical presence but because
215
00:07:51,199 --> 00:07:54,759
of the nature of how companies are
216
00:07:52,919 --> 00:07:56,560
structured the employment part might be
217
00:07:54,759 --> 00:07:58,319
an issue because you're not directly
218
00:07:56,560 --> 00:08:00,280
necessarily employing 20 employees it
219
00:07:58,319 --> 00:08:02,199
might be an affiliate that's a reporting
220
00:08:00,280 --> 00:08:04,319
company and then what the reporting
221
00:08:02,199 --> 00:08:06,400
company also needs to report on are its
222
00:08:04,319 --> 00:08:09,440
beneficial owners and those are
223
00:08:06,400 --> 00:08:11,479
individuals who directly or indirectly
224
00:08:09,440 --> 00:08:13,800
exercise substantial control over a
225
00:08:11,479 --> 00:08:15,960
reporting company or who own or control
226
00:08:13,800 --> 00:08:17,639
at least 25% of the ownership interest
227
00:08:15,960 --> 00:08:19,240
in the reporting company substantial
228
00:08:17,639 --> 00:08:21,240
control just means you know your
229
00:08:19,240 --> 00:08:23,520
managers of your llc's but it also
230
00:08:21,240 --> 00:08:25,599
includes your senior officers your C
231
00:08:23,520 --> 00:08:27,840
suite and your GC and people that act in
232
00:08:25,599 --> 00:08:30,199
that capacity the ownership requirement
233
00:08:27,840 --> 00:08:32,880
is direct or indirect meaning that if
234
00:08:30,199 --> 00:08:34,200
you're at the top of you know a chain of
235
00:08:32,880 --> 00:08:36,719
corporate entities you're not just
236
00:08:34,200 --> 00:08:38,279
reporting your sole member LLC you're
237
00:08:36,719 --> 00:08:40,880
going all the way to the top to the
238
00:08:38,279 --> 00:08:42,919
human that owns interests so it could be
239
00:08:40,880 --> 00:08:44,920
kind of a math problem and this is
240
00:08:42,919 --> 00:08:46,760
really in my opinion the hardest part
241
00:08:44,920 --> 00:08:48,600
about figuring out this law is who the
242
00:08:46,760 --> 00:08:50,760
beneficial owners are it becomes a math
243
00:08:48,600 --> 00:08:52,560
problem sometimes and also you know
244
00:08:50,760 --> 00:08:55,120
you're looking at people that might not
245
00:08:52,560 --> 00:08:57,680
be officially listed as an owner but who
246
00:08:55,120 --> 00:08:59,519
nonetheless exert control so yeah that's
247
00:08:57,680 --> 00:09:01,000
kind of a quick and dirty overview
248
00:08:59,519 --> 00:09:03,000
there's obviously a lot of other issues
249
00:09:01,000 --> 00:09:04,959
there but you know wanted to answer that
250
00:09:03,000 --> 00:09:06,839
question I appreciate that overview
251
00:09:04,959 --> 00:09:09,480
obviously the state licensed cannabis
252
00:09:06,839 --> 00:09:11,279
industry is no stranger to copious
253
00:09:09,480 --> 00:09:13,079
amounts of disclosure and in the
254
00:09:11,279 --> 00:09:14,880
Cannabis industry from the regulatory
255
00:09:13,079 --> 00:09:16,160
perspective these quote unquote owners
256
00:09:14,880 --> 00:09:18,200
whether they're identified as true
257
00:09:16,160 --> 00:09:20,920
parties of Interest beneficial owners
258
00:09:18,200 --> 00:09:22,320
whatever the term of art is similar
259
00:09:20,920 --> 00:09:24,680
right where a certain position in the
260
00:09:22,320 --> 00:09:26,200
cap table or this idea of Direction
261
00:09:24,680 --> 00:09:28,399
control and management can trigger
262
00:09:26,200 --> 00:09:31,120
disclosure when you say substantial
263
00:09:28,399 --> 00:09:33,640
control under the CTA did Congress
264
00:09:31,120 --> 00:09:36,160
Define that term or is it left undefined
265
00:09:33,640 --> 00:09:38,680
to be determined by whatever body is
266
00:09:36,160 --> 00:09:41,800
going to enforce this and before you s
267
00:09:38,680 --> 00:09:43,680
go there who is enforcing this yeah good
268
00:09:41,800 --> 00:09:45,839
question this is actually enforced by
269
00:09:43,680 --> 00:09:47,880
finson which is the financial crimes
270
00:09:45,839 --> 00:09:50,480
enforcement Network they're kind of like
271
00:09:47,880 --> 00:09:52,279
an arm of Treasury and they're as
272
00:09:50,480 --> 00:09:54,640
implied by their name their their
273
00:09:52,279 --> 00:09:56,760
bandaid is mostly dealing with financial
274
00:09:54,640 --> 00:09:59,560
crimes like with banks so there if
275
00:09:56,760 --> 00:10:02,200
you've heard of the cdb the customers du
276
00:09:59,560 --> 00:10:04,360
Dil requirements for banks that is a
277
00:10:02,200 --> 00:10:06,959
finsen concept and they've actually
278
00:10:04,360 --> 00:10:08,640
applied it to the the the beneficial
279
00:10:06,959 --> 00:10:11,000
definition here so they're the ones
280
00:10:08,640 --> 00:10:12,640
enforcing it and sorry what was your
281
00:10:11,000 --> 00:10:14,160
second question when we talk about
282
00:10:12,640 --> 00:10:16,279
substantial control because this is
283
00:10:14,160 --> 00:10:19,880
always where where my cannabus clients
284
00:10:16,279 --> 00:10:21,839
get caught in a way where these
285
00:10:19,880 --> 00:10:23,959
Regulators are wise enough not to Define
286
00:10:21,839 --> 00:10:25,680
it because they know it when they see it
287
00:10:23,959 --> 00:10:28,279
and to your point you may have
288
00:10:25,680 --> 00:10:29,880
substantial control despite your title
289
00:10:28,279 --> 00:10:32,040
and you may not be listen listed in the
290
00:10:29,880 --> 00:10:34,240
SE Suite did they Define substantial
291
00:10:32,040 --> 00:10:36,320
control in the context of the CTA they
292
00:10:34,240 --> 00:10:38,480
do actually it's a pretty dialed in
293
00:10:36,320 --> 00:10:40,680
definition so there's four parts one is
294
00:10:38,480 --> 00:10:43,519
a senior officer and they give examples
295
00:10:40,680 --> 00:10:47,959
of that they say specifically presidents
296
00:10:43,519 --> 00:10:50,480
deos dfos doos and general counsel or
297
00:10:47,959 --> 00:10:52,560
anybody that acts in that capacity so
298
00:10:50,480 --> 00:10:54,200
you know those roles are often
299
00:10:52,560 --> 00:10:56,160
associated with a corporation but you
300
00:10:54,200 --> 00:10:58,160
could have a similar rule in an LLC
301
00:10:56,160 --> 00:11:00,560
besides a manager so anybody that acts
302
00:10:58,160 --> 00:11:02,399
in that capacity second part of that is
303
00:11:00,560 --> 00:11:04,560
anyone having the authority to appoint
304
00:11:02,399 --> 00:11:07,440
or remove a senior officer or a majority
305
00:11:04,560 --> 00:11:09,399
of the board so to me that's kind of
306
00:11:07,440 --> 00:11:11,320
duplicative of the ownership requirement
307
00:11:09,399 --> 00:11:13,519
because that implies to me an equity
308
00:11:11,320 --> 00:11:14,920
holder or a board member there was some
309
00:11:13,519 --> 00:11:16,600
debate about well do you have to list
310
00:11:14,920 --> 00:11:18,639
every single person on the board and I
311
00:11:16,600 --> 00:11:21,800
think it's pretty unequivocal that you
312
00:11:18,639 --> 00:11:24,639
do even if you have a 35 person board
313
00:11:21,800 --> 00:11:27,959
right that one person could be casting a
314
00:11:24,639 --> 00:11:30,079
deciding vote so over major you know um
315
00:11:27,959 --> 00:11:31,920
decisions in the company number three is
316
00:11:30,079 --> 00:11:34,600
anyone who has substantial influence
317
00:11:31,920 --> 00:11:36,600
over important matters and lastly it's
318
00:11:34,600 --> 00:11:38,920
anyone who has any other form of
319
00:11:36,600 --> 00:11:41,639
substantial control and those to me are
320
00:11:38,920 --> 00:11:44,560
a catch all they could include everybody
321
00:11:41,639 --> 00:11:46,959
I kind of think of the the last two as I
322
00:11:44,560 --> 00:11:47,959
like say the Tony Soprano rule where I
323
00:11:46,959 --> 00:11:50,120
don't know if you guys have seen
324
00:11:47,959 --> 00:11:51,680
Sopranos but um he had that Deli that he
325
00:11:50,120 --> 00:11:53,720
used to always be outside of right like
326
00:11:51,680 --> 00:11:56,560
drinking of espresso and he definitely
327
00:11:53,720 --> 00:11:58,760
was not on the title of that Deli right
328
00:11:56,560 --> 00:12:00,320
but he exerted a form of substantial
329
00:11:58,760 --> 00:12:02,760
control over that Deli like he
330
00:12:00,320 --> 00:12:05,200
definitely was running things but maybe
331
00:12:02,760 --> 00:12:07,000
not in official capacity and they really
332
00:12:05,200 --> 00:12:09,120
you know finson really added this catch
333
00:12:07,000 --> 00:12:11,040
all definition to catch the Bad actors
334
00:12:09,120 --> 00:12:13,399
who are otherwise not in the books begs
335
00:12:11,040 --> 00:12:15,800
the question if I were a to soprano why
336
00:12:13,399 --> 00:12:19,000
would I report on myself but that's
337
00:12:15,800 --> 00:12:21,199
another issue and this also often comes
338
00:12:19,000 --> 00:12:24,800
up with cannabis companies management
339
00:12:21,199 --> 00:12:26,320
companies and you know and I think we
340
00:12:24,800 --> 00:12:27,959
all know if you've been in the sector
341
00:12:26,320 --> 00:12:29,760
why you would have a management company
342
00:12:27,959 --> 00:12:32,279
there are many good strategic reasons
343
00:12:29,760 --> 00:12:34,639
but often times it is nefarious and for
344
00:12:32,279 --> 00:12:36,440
reasons that cut against transparency
345
00:12:34,639 --> 00:12:40,360
Etc and we're just talking about the
346
00:12:36,440 --> 00:12:43,199
formation stage so I form my new Co I'm
347
00:12:40,360 --> 00:12:44,800
not exempt I have to report if I know
348
00:12:43,199 --> 00:12:46,639
I'm going to have a management company
349
00:12:44,800 --> 00:12:48,240
come in and run my day-to-day often
350
00:12:46,639 --> 00:12:50,079
times like what we see with casinos
351
00:12:48,240 --> 00:12:51,519
casinos are rarely run by the people who
352
00:12:50,079 --> 00:12:53,440
actually own them they bring in a top
353
00:12:51,519 --> 00:12:55,399
tier management team that specializes
354
00:12:53,440 --> 00:12:57,360
insecurity and gaming is that management
355
00:12:55,399 --> 00:12:58,560
company disclosable in that context
356
00:12:57,360 --> 00:13:01,000
because they will be exerting
357
00:12:58,560 --> 00:13:03,680
substantial control over day-to-day Ops
358
00:13:01,000 --> 00:13:06,279
absolutely so after your initial filing
359
00:13:03,680 --> 00:13:09,240
you also have a duty to update any
360
00:13:06,279 --> 00:13:11,399
information within 30 days so back to
361
00:13:09,240 --> 00:13:13,320
your fact pattern right let's say when I
362
00:13:11,399 --> 00:13:15,600
report submit my initial report I might
363
00:13:13,320 --> 00:13:17,480
not list him as a beneficial owner but
364
00:13:15,600 --> 00:13:19,680
once I sign that management agreement I
365
00:13:17,480 --> 00:13:21,480
have to list not just you know not the
366
00:13:19,680 --> 00:13:23,480
the management company but the people
367
00:13:21,480 --> 00:13:25,320
actually running that company the people
368
00:13:23,480 --> 00:13:26,519
that the individuals that are exerting
369
00:13:25,320 --> 00:13:29,199
substantial control through that
370
00:13:26,519 --> 00:13:31,320
management company and also beyond that
371
00:13:29,199 --> 00:13:33,800
the management company itself would be a
372
00:13:31,320 --> 00:13:36,720
reporting company so they would also
373
00:13:33,800 --> 00:13:39,000
have to disclose their beneficial owners
374
00:13:36,720 --> 00:13:41,199
and hopefully those two reports align or
375
00:13:39,000 --> 00:13:45,800
otherwise there's something wrong there
376
00:13:41,199 --> 00:13:48,360
and are states adopting many ctas to
377
00:13:45,800 --> 00:13:50,399
remain lock step with the feds here
378
00:13:48,360 --> 00:13:53,279
unfortunately yeah that's a very good
379
00:13:50,399 --> 00:13:56,880
question New York just passed their own
380
00:13:53,279 --> 00:13:58,639
it's called the LLC transparency act and
381
00:13:56,880 --> 00:14:00,639
um in many ways it's quite a bit worse
382
00:13:58,639 --> 00:14:04,079
than the federal law so it's doesn't
383
00:14:00,639 --> 00:14:06,759
take into effect until January 1 2026 it
384
00:14:04,079 --> 00:14:09,480
applies to L just llc's as of right now
385
00:14:06,759 --> 00:14:11,199
but llc's formed or qualified to do
386
00:14:09,480 --> 00:14:13,639
business in New York which is I would
387
00:14:11,199 --> 00:14:15,680
say the majority of companies in the US
388
00:14:13,639 --> 00:14:17,680
and their reporting is you know unlike
389
00:14:15,680 --> 00:14:19,720
for example state blue skies law Blue
390
00:14:17,680 --> 00:14:22,120
Sky laws that are preempted by you know
391
00:14:19,720 --> 00:14:23,959
federal laws this is in addition to the
392
00:14:22,120 --> 00:14:27,079
CTA so you're going to have to make a
393
00:14:23,959 --> 00:14:29,279
report under the federal CTA and then
394
00:14:27,079 --> 00:14:31,120
also the New York transparency Act and
395
00:14:29,279 --> 00:14:32,800
they have some quirks too they rely on a
396
00:14:31,120 --> 00:14:34,839
lot of the same Concepts as the federal
397
00:14:32,800 --> 00:14:36,560
CTA they rely on the same definitions of
398
00:14:34,839 --> 00:14:39,680
substantial control and beneficial owner
399
00:14:36,560 --> 00:14:41,160
for example but one thing is under the
400
00:14:39,680 --> 00:14:42,880
federal CTA if you're exempt you just
401
00:14:41,160 --> 00:14:45,600
don't file you don't report it it's a
402
00:14:42,880 --> 00:14:48,000
Scouts Honor almost you have to certify
403
00:14:45,600 --> 00:14:49,560
which exemption you qualify for the good
404
00:14:48,000 --> 00:14:52,079
thing is there are only civil penalties
405
00:14:49,560 --> 00:14:54,560
involved but still additional thing and
406
00:14:52,079 --> 00:14:56,880
that's just New York California has two
407
00:14:54,560 --> 00:15:00,399
similar acts that are in its legislative
408
00:14:56,880 --> 00:15:02,360
body Maryland also o has a similar act
409
00:15:00,399 --> 00:15:04,440
going through you know its legislative
410
00:15:02,360 --> 00:15:06,800
body as well and then a bunch of other
411
00:15:04,440 --> 00:15:08,680
states are considering proposing these
412
00:15:06,800 --> 00:15:10,440
laws I think as a corporate lawyer we're
413
00:15:08,680 --> 00:15:12,680
all worried about Delaware right what if
414
00:15:10,440 --> 00:15:14,560
Delaware does this then pretty much 60%
415
00:15:12,680 --> 00:15:16,560
of American companies will have to
416
00:15:14,560 --> 00:15:18,680
report there as well so with the
417
00:15:16,560 --> 00:15:20,440
proliferation of these state laws I'm
418
00:15:18,680 --> 00:15:23,720
hoping that again there will be a blue
419
00:15:20,440 --> 00:15:26,160
sky law like concept where the federal
420
00:15:23,720 --> 00:15:27,360
law preempts individual State ones but
421
00:15:26,160 --> 00:15:29,759
right now it looks like you just have to
422
00:15:27,360 --> 00:15:31,480
make a bunch of filings for every state
423
00:15:29,759 --> 00:15:33,199
jurisdiction you're in yeah and I just
424
00:15:31,480 --> 00:15:35,079
want to emphasize for the cannabis
425
00:15:33,199 --> 00:15:37,399
companies this will be maybe the third
426
00:15:35,079 --> 00:15:39,000
or fourth interation of disclosure which
427
00:15:37,399 --> 00:15:40,920
is going to differ from your cannabis
428
00:15:39,000 --> 00:15:43,160
disclosures with your regulator because
429
00:15:40,920 --> 00:15:44,720
it's just a different set of priorities
430
00:15:43,160 --> 00:15:47,079
and Reporting obligations the
431
00:15:44,720 --> 00:15:50,040
substantial control issue alone is going
432
00:15:47,079 --> 00:15:51,800
to expand under the CTA whereas Most
433
00:15:50,040 --> 00:15:53,880
states in the Cannabis industry would
434
00:15:51,800 --> 00:15:55,920
dictate that it really only goes to this
435
00:15:53,880 --> 00:15:57,360
meaningful control and Authority without
436
00:15:55,920 --> 00:15:59,160
the catchall so that'll be a
437
00:15:57,360 --> 00:16:01,319
complicating Factor now let's talk about
438
00:15:59,160 --> 00:16:02,959
large operating companies our friends
439
00:16:01,319 --> 00:16:05,519
commonly known as The multi-state
440
00:16:02,959 --> 00:16:07,240
Operators on its face seems like they're
441
00:16:05,519 --> 00:16:09,560
not disclosable because they're probably
442
00:16:07,240 --> 00:16:11,800
netting the required Revenue per year
443
00:16:09,560 --> 00:16:14,480
and they've got 20 or more employees but
444
00:16:11,800 --> 00:16:17,000
if they start subsidiaries or they've
445
00:16:14,480 --> 00:16:19,639
got these related or affiliate companies
446
00:16:17,000 --> 00:16:22,000
that often hold a variety of assets real
447
00:16:19,639 --> 00:16:24,959
estate intellectual property equipment
448
00:16:22,000 --> 00:16:26,959
that they deploy to their cannabis asset
449
00:16:24,959 --> 00:16:28,720
companies are those companies going to
450
00:16:26,959 --> 00:16:31,040
be reportable despite the fact that
451
00:16:28,720 --> 00:16:33,639
maybe maybe their wholly own Subs great
452
00:16:31,040 --> 00:16:35,519
question so one of the exemptions I
453
00:16:33,639 --> 00:16:37,600
declined to discuss a second ago was the
454
00:16:35,519 --> 00:16:40,440
subsidiary exemption and that exemption
455
00:16:37,600 --> 00:16:42,160
is that for certain exempt entities
456
00:16:40,440 --> 00:16:44,319
their subsidiary including the large
457
00:16:42,160 --> 00:16:45,880
operating company exempt companies their
458
00:16:44,319 --> 00:16:47,959
wholly owned
459
00:16:45,880 --> 00:16:50,600
subsidiaries are also exempt from
460
00:16:47,959 --> 00:16:53,680
reporting I stress wholly own because if
461
00:16:50,600 --> 00:16:57,440
you have like a 99
462
00:16:53,680 --> 00:17:00,360
99.99% owner and a 0.01% owner that
463
00:16:57,440 --> 00:17:02,800
subsidiary is not exempt if the 0.01 is
464
00:17:00,360 --> 00:17:04,839
not exempt and as is common with these
465
00:17:02,800 --> 00:17:06,959
msos right the cobweb of ownership
466
00:17:04,839 --> 00:17:10,280
structures will mean that a lot of those
467
00:17:06,959 --> 00:17:12,919
subs are not exempt and then also just
468
00:17:10,280 --> 00:17:15,280
to put a finer point on it you know we
469
00:17:12,919 --> 00:17:17,480
think we say a company right reporting
470
00:17:15,280 --> 00:17:19,799
it's each individual entity in the
471
00:17:17,480 --> 00:17:21,799
company group so it's not just you know
472
00:17:19,799 --> 00:17:24,439
the MSO at the top right or whatever
473
00:17:21,799 --> 00:17:26,760
it's every single entity that is in that
474
00:17:24,439 --> 00:17:28,360
network is reporting so if you have a
475
00:17:26,760 --> 00:17:29,960
real estate owned company that has to
476
00:17:28,360 --> 00:17:32,640
report if you have a company that holds
477
00:17:29,960 --> 00:17:35,200
your IP that has to report itself and
478
00:17:32,640 --> 00:17:37,360
because of the the direct 20 employee
479
00:17:35,200 --> 00:17:39,039
requirement a lot of those entities are
480
00:17:37,360 --> 00:17:40,840
not going to qualify for either the
481
00:17:39,039 --> 00:17:42,840
large operating CET exemption or the
482
00:17:40,840 --> 00:17:45,360
subsidiary because they don't meet the
483
00:17:42,840 --> 00:17:47,799
it's it's a entity by entity call for
484
00:17:45,360 --> 00:17:50,200
the $5 million gross sales or tax you
485
00:17:47,799 --> 00:17:51,640
can consolidate you know entities so if
486
00:17:50,200 --> 00:17:53,559
you're filing as a consolidate group and
487
00:17:51,640 --> 00:17:55,720
each single entity in that filing group
488
00:17:53,559 --> 00:17:58,240
can Avail themselves of that for example
489
00:17:55,720 --> 00:17:59,400
a disregarded entity cannot because it
490
00:17:58,240 --> 00:18:01,520
doesn't file tax
491
00:17:59,400 --> 00:18:04,000
relies on a parent to do so a lot of
492
00:18:01,520 --> 00:18:05,760
kind of find kinks in this exemption
493
00:18:04,000 --> 00:18:08,720
that you definitely should have someone
494
00:18:05,760 --> 00:18:10,360
analyze closely wild it's just wild
495
00:18:08,720 --> 00:18:12,480
finen you mentioned the financial crimes
496
00:18:10,360 --> 00:18:15,280
enforcement Network they issued guidance
497
00:18:12,480 --> 00:18:16,720
to financial institutions back in 2014
498
00:18:15,280 --> 00:18:18,600
that essentially enable those
499
00:18:16,720 --> 00:18:20,360
institutions despite anti-money
500
00:18:18,600 --> 00:18:23,039
laundering laws in the bank secrecy act
501
00:18:20,360 --> 00:18:24,720
to service these federally illegal drug
502
00:18:23,039 --> 00:18:26,120
traffickers as the federal government
503
00:18:24,720 --> 00:18:29,679
would deem them under the Controlled
504
00:18:26,120 --> 00:18:31,799
Substances Act those guidelines hinge on
505
00:18:29,679 --> 00:18:34,080
these kyc rules these know your customer
506
00:18:31,799 --> 00:18:37,200
rules an enforcement M from the doj that
507
00:18:34,080 --> 00:18:40,280
no longer exists and they're very robust
508
00:18:37,200 --> 00:18:43,159
in kind of keeping eyes on cannabis
509
00:18:40,280 --> 00:18:45,080
operators essentially droning these
510
00:18:43,159 --> 00:18:46,880
financial institutions into doing the
511
00:18:45,080 --> 00:18:49,080
Dirty Work of the feds and there's a
512
00:18:46,880 --> 00:18:51,200
whole suspicious activity report filing
513
00:18:49,080 --> 00:18:52,559
system that was created specifically for
514
00:18:51,200 --> 00:18:54,120
cannabis companies out of those
515
00:18:52,559 --> 00:18:56,039
guidelines do you think there's an
516
00:18:54,120 --> 00:18:57,520
interplay here and this is speculative
517
00:18:56,039 --> 00:18:58,799
you can just say I don't know if you
518
00:18:57,520 --> 00:19:00,000
don't know but if you have an opinion
519
00:18:58,799 --> 00:19:02,559
and please share do you think there's an
520
00:19:00,000 --> 00:19:05,159
interplay here between those guidelines
521
00:19:02,559 --> 00:19:07,240
and the CTA given that it's the same arm
522
00:19:05,159 --> 00:19:10,360
of Treasury that's going to be the
523
00:19:07,240 --> 00:19:13,760
Watchdog and that this is going to
524
00:19:10,360 --> 00:19:17,080
further maybe hurt is a strong word but
525
00:19:13,760 --> 00:19:19,880
further impact these momand pop cannabis
526
00:19:17,080 --> 00:19:22,120
companies right rather than the msos I
527
00:19:19,880 --> 00:19:23,880
do I don't think any of this would you
528
00:19:22,120 --> 00:19:25,679
know targeting the cannabis companies I
529
00:19:23,880 --> 00:19:27,159
think it might just be an unfortunate
530
00:19:25,679 --> 00:19:30,720
byproduct but I think there's a
531
00:19:27,159 --> 00:19:33,240
possibility and here's why so the C the
532
00:19:30,720 --> 00:19:35,039
law passed by Congress had three parts
533
00:19:33,240 --> 00:19:37,679
one was to kind of Define The Beneficial
534
00:19:35,039 --> 00:19:40,200
ownership that needs to be collected two
535
00:19:37,679 --> 00:19:42,600
is which entities enforcement
536
00:19:40,200 --> 00:19:44,880
authorities can access information and
537
00:19:42,600 --> 00:19:47,880
number three is actually requiring
538
00:19:44,880 --> 00:19:51,760
Vinson to update their beneficial
539
00:19:47,880 --> 00:19:54,840
ownership rules CDD rules to match the
540
00:19:51,760 --> 00:19:56,880
to match a CTA actually so that kyc
541
00:19:54,840 --> 00:19:58,200
stuff is going to undergo a change to
542
00:19:56,880 --> 00:20:00,400
have their substantial ownership
543
00:19:58,200 --> 00:20:02,320
definition match this one so there's an
544
00:20:00,400 --> 00:20:05,280
interplay there where it seems like
545
00:20:02,320 --> 00:20:06,760
finson is kind of refining the concept
546
00:20:05,280 --> 00:20:08,240
of a beneficial owner and who needs to
547
00:20:06,760 --> 00:20:09,919
be reported who need to be monitored
548
00:20:08,240 --> 00:20:11,640
then kind of applying it retroactive to
549
00:20:09,919 --> 00:20:14,000
each other laws you know that's
550
00:20:11,640 --> 00:20:15,400
definitely somewhat concerning I'd say
551
00:20:14,000 --> 00:20:17,760
and number two and we haven't really
552
00:20:15,400 --> 00:20:18,919
talked about this much is the repository
553
00:20:17,760 --> 00:20:21,280
because all the stuff is going to be
554
00:20:18,919 --> 00:20:23,640
stored at finson and the good news is
555
00:20:21,280 --> 00:20:25,240
that it's not going to be it's not going
556
00:20:23,640 --> 00:20:27,320
to be public information it can't be
557
00:20:25,240 --> 00:20:29,000
subject to a fory request not you know
558
00:20:27,320 --> 00:20:30,520
Joe Schmo off the street can't just like
559
00:20:29,000 --> 00:20:33,320
log in finson website and check the
560
00:20:30,520 --> 00:20:35,400
ownership of you know some big MSO
561
00:20:33,320 --> 00:20:38,039
however there is a lot there are a lot
562
00:20:35,400 --> 00:20:39,760
of rules about who can access it there's
563
00:20:38,039 --> 00:20:43,039
a pilot program right now where it's
564
00:20:39,760 --> 00:20:46,679
just federal law enforcement so you know
565
00:20:43,039 --> 00:20:49,600
FBI Homeland Security NSA I'm assuming
566
00:20:46,679 --> 00:20:50,919
at some point maybe CIA I I don't know
567
00:20:49,600 --> 00:20:53,960
but it's going to be eventually rolled
568
00:20:50,919 --> 00:20:56,600
out to other regulatory bodies to State
569
00:20:53,960 --> 00:20:58,880
and local governments who you know based
570
00:20:56,600 --> 00:21:01,200
on certain access parameters and then to
571
00:20:58,880 --> 00:21:03,159
the banks and then even to foreign
572
00:21:01,200 --> 00:21:05,000
authorities those foreign authorities
573
00:21:03,159 --> 00:21:06,600
cannot directly access the database they
574
00:21:05,000 --> 00:21:08,559
have to have submit a request to a US
575
00:21:06,600 --> 00:21:11,360
law enforcement Authority which is
576
00:21:08,559 --> 00:21:13,919
obviously good but now we have this
577
00:21:11,360 --> 00:21:16,039
giant database theoretically of you know
578
00:21:13,919 --> 00:21:18,360
most median to small companies in the
579
00:21:16,039 --> 00:21:19,679
United States with all its owners and I
580
00:21:18,360 --> 00:21:21,400
didn't mention this before but you're
581
00:21:19,679 --> 00:21:23,080
having to submit your driver's license a
582
00:21:21,400 --> 00:21:25,320
copy of your driver's license your
583
00:21:23,080 --> 00:21:26,760
street address you know your real name
584
00:21:25,320 --> 00:21:29,799
all the stuff is going to be stored and
585
00:21:26,760 --> 00:21:31,440
associated with the company so right now
586
00:21:29,799 --> 00:21:35,520
of course federal government is not
587
00:21:31,440 --> 00:21:39,080
actively you know enforcing its the CSA
588
00:21:35,520 --> 00:21:40,960
but if for whatever reason one day you
589
00:21:39,080 --> 00:21:43,159
know legislation does not go the way we
590
00:21:40,960 --> 00:21:45,960
all hope it does the federal government
591
00:21:43,159 --> 00:21:48,600
now has access to this gigantic database
592
00:21:45,960 --> 00:21:51,360
where theoretically cannabis companies
593
00:21:48,600 --> 00:21:54,600
have put forth their owners names and
594
00:21:51,360 --> 00:21:56,200
addresses and Dage licenses which is
595
00:21:54,600 --> 00:21:58,640
accessible to you know your state
596
00:21:56,200 --> 00:22:01,200
regulator theoretically at some point so
597
00:21:58,640 --> 00:22:03,240
so given that cannabis is still I mean
598
00:22:01,200 --> 00:22:05,960
technically and very really you know
599
00:22:03,240 --> 00:22:09,400
very actually illegal I think there's
600
00:22:05,960 --> 00:22:10,600
potential for abuse here I'm with you in
601
00:22:09,400 --> 00:22:11,919
the past I've done a good amount of
602
00:22:10,600 --> 00:22:13,919
foreign direct investment into the
603
00:22:11,919 --> 00:22:15,919
Cannabis industry and rarely would you
604
00:22:13,919 --> 00:22:18,080
see Foreigners for a multitude of
605
00:22:15,919 --> 00:22:19,679
reasons directly invest in cannabis
606
00:22:18,080 --> 00:22:21,880
companies it's too on the nose for
607
00:22:19,679 --> 00:22:24,120
things like immigration and violations
608
00:22:21,880 --> 00:22:25,960
of rules in the Home Country so they
609
00:22:24,120 --> 00:22:27,679
often Place their investments in
610
00:22:25,960 --> 00:22:30,600
ancillary companies right and when we
611
00:22:27,679 --> 00:22:33,400
say ancillary we mean the classics IP
612
00:22:30,600 --> 00:22:35,320
real estate equipment Consulting Etc all
613
00:22:33,400 --> 00:22:38,760
of those companies will be on the hook
614
00:22:35,320 --> 00:22:40,559
for this reporting now and often times
615
00:22:38,760 --> 00:22:42,400
you would see in their corporate filings
616
00:22:40,559 --> 00:22:44,640
it'd be a situation where they maybe
617
00:22:42,400 --> 00:22:47,480
tell the some of the truth but not all
618
00:22:44,640 --> 00:22:49,279
of the truth but by Omission it's still
619
00:22:47,480 --> 00:22:50,799
valid in that they're a real estate
620
00:22:49,279 --> 00:22:52,159
company but they don't go so far as to
621
00:22:50,799 --> 00:22:54,360
say well we're a real estate company
622
00:22:52,159 --> 00:22:56,760
that leases exclusively to cannabis
623
00:22:54,360 --> 00:22:58,120
businesses right with this type of
624
00:22:56,760 --> 00:23:01,000
reporting do you think there's going to
625
00:22:58,120 --> 00:23:03,200
be a chilling effect on foreign direct
626
00:23:01,000 --> 00:23:05,760
investment because now where maybe you
627
00:23:03,200 --> 00:23:07,080
could have skirted the state regulator
628
00:23:05,760 --> 00:23:08,600
right because State regulator only cares
629
00:23:07,080 --> 00:23:12,559
about the canas company you are going to
630
00:23:08,600 --> 00:23:14,919
be in the crosshairs of finson if you're
631
00:23:12,559 --> 00:23:16,559
not exempt otherwise that's a really
632
00:23:14,919 --> 00:23:18,080
good question I've only thought about
633
00:23:16,559 --> 00:23:20,120
this really in the concept of data
634
00:23:18,080 --> 00:23:22,760
privacy laws but I want to kind of you
635
00:23:20,120 --> 00:23:24,480
know explore this because the I mean not
636
00:23:22,760 --> 00:23:26,440
theoretically actually if you're a
637
00:23:24,480 --> 00:23:27,919
foreigner and you're a beneficial owner
638
00:23:26,440 --> 00:23:29,520
you're going to need to be reported to
639
00:23:27,919 --> 00:23:31,880
fincent
640
00:23:29,520 --> 00:23:34,600
so let's say you're I don't know an
641
00:23:31,880 --> 00:23:36,960
investor from Kuwait or Saudi Arabia
642
00:23:34,600 --> 00:23:39,480
where cannabis is extremely illegal
643
00:23:36,960 --> 00:23:41,279
right you will if you're qualified as a
644
00:23:39,480 --> 00:23:44,200
beneficial owner of one of of a US
645
00:23:41,279 --> 00:23:46,760
cannabis company you will have to be
646
00:23:44,200 --> 00:23:48,840
reported and your information stored in
647
00:23:46,760 --> 00:23:51,320
the finson database including you know
648
00:23:48,840 --> 00:23:54,000
for foreigners a copy a a physical you
649
00:23:51,320 --> 00:23:55,360
know photo copy of your passport along
650
00:23:54,000 --> 00:23:58,200
with your name and your address and all
651
00:23:55,360 --> 00:23:59,960
that so finson now has this information
652
00:23:58,200 --> 00:24:01,600
let's say at some point when they roll
653
00:23:59,960 --> 00:24:04,159
this out to foreign law enforcement
654
00:24:01,600 --> 00:24:06,240
agencies the Kuwaiti authorities say hey
655
00:24:04,159 --> 00:24:07,880
this guy is suspicious can you you know
656
00:24:06,240 --> 00:24:09,720
because this is a violation of our laws
657
00:24:07,880 --> 00:24:11,279
for him to even own an interest in this
658
00:24:09,720 --> 00:24:13,799
company you know can we access your
659
00:24:11,279 --> 00:24:15,520
database and check the records now I
660
00:24:13,799 --> 00:24:16,880
mean there's all sorts of reasons
661
00:24:15,520 --> 00:24:19,320
perhaps why we wouldn't want to do that
662
00:24:16,880 --> 00:24:21,600
as a us right but theoretically since we
663
00:24:19,320 --> 00:24:23,400
do have that database let's say you know
664
00:24:21,600 --> 00:24:25,600
we want it to be on better terms to that
665
00:24:23,400 --> 00:24:27,360
that country we could give them full
666
00:24:25,600 --> 00:24:29,799
access to see every single one of their
667
00:24:27,360 --> 00:24:31,520
citizens who ow M interest alleged
668
00:24:29,799 --> 00:24:33,000
cannabis company so I think there are
669
00:24:31,520 --> 00:24:34,720
some issues there you know the data
670
00:24:33,000 --> 00:24:35,880
privacy ISS I was alluding to is for a
671
00:24:34,720 --> 00:24:38,600
lot of countries you have to give
672
00:24:35,880 --> 00:24:40,640
consent to transfer information across
673
00:24:38,600 --> 00:24:42,320
borders you know what is consent is them
674
00:24:40,640 --> 00:24:43,600
just merely giving you the information
675
00:24:42,320 --> 00:24:45,360
is that consent you need something
676
00:24:43,600 --> 00:24:46,279
affirmative all sorts of issues there
677
00:24:45,360 --> 00:24:47,799
when you're when you're talking about
678
00:24:46,279 --> 00:24:50,640
transferring information across borders
679
00:24:47,799 --> 00:24:53,360
and storing it to kind of round this out
680
00:24:50,640 --> 00:24:55,720
before I let you go um because this is
681
00:24:53,360 --> 00:24:57,679
fascinating to me in that it's even more
682
00:24:55,720 --> 00:25:00,080
surveillance more transparency in an
683
00:24:57,679 --> 00:25:01,600
industry comes from a paranoid place
684
00:25:00,080 --> 00:25:03,399
already and it applies to everybody
685
00:25:01,600 --> 00:25:05,760
number one the softball question just
686
00:25:03,399 --> 00:25:07,840
because cannabis is federally illegal
687
00:25:05,760 --> 00:25:10,799
that does not mean that you don't comply
688
00:25:07,840 --> 00:25:12,240
with the CTA right absolutely I guess
689
00:25:10,799 --> 00:25:13,840
there is a question of how are they
690
00:25:12,240 --> 00:25:16,159
going to go after the 32 million
691
00:25:13,840 --> 00:25:17,600
entities they think need to report if
692
00:25:16,159 --> 00:25:19,799
you're aware of this law which
693
00:25:17,600 --> 00:25:21,760
unfortunately now you are and you don't
694
00:25:19,799 --> 00:25:24,080
report then you have willfully violate
695
00:25:21,760 --> 00:25:25,919
violated this uh the CPA and you know
696
00:25:24,080 --> 00:25:28,799
you could face two years in jail
697
00:25:25,919 --> 00:25:30,960
fabulous number two is anybody
698
00:25:28,799 --> 00:25:33,279
challenging this because I don't see
699
00:25:30,960 --> 00:25:34,679
Corporate America loving this especially
700
00:25:33,279 --> 00:25:36,279
with the entrepreneurial spirit in the
701
00:25:34,679 --> 00:25:38,559
United States where we don't want to be
702
00:25:36,279 --> 00:25:40,679
bogged down by regulatory red tape
703
00:25:38,559 --> 00:25:42,840
public health and safety stuff set aside
704
00:25:40,679 --> 00:25:44,399
right like FDA and all of our consumer
705
00:25:42,840 --> 00:25:46,320
protection stuff is anybody going to
706
00:25:44,399 --> 00:25:47,919
overturn this is this going to last
707
00:25:46,320 --> 00:25:51,080
actually it's a very good and timely
708
00:25:47,919 --> 00:25:53,279
question so the N nsba the National
709
00:25:51,080 --> 00:25:55,279
Small Business Association I believe
710
00:25:53,279 --> 00:25:58,399
they represent around 200,000 small
711
00:25:55,279 --> 00:26:00,880
businesses in the US they sued in the
712
00:25:58,399 --> 00:26:03,679
Northern District of Alabama and they
713
00:26:00,880 --> 00:26:05,480
actually won as of March 1st the judge
714
00:26:03,679 --> 00:26:07,120
in the Northern District of Alabama
715
00:26:05,480 --> 00:26:09,360
found that the the Act was
716
00:26:07,120 --> 00:26:11,039
unconstitutional based on congress's
717
00:26:09,360 --> 00:26:12,360
article one Powers which is the Commerce
718
00:26:11,039 --> 00:26:14,360
Clause I'm sure you guys have heard
719
00:26:12,360 --> 00:26:15,799
about the Dorman commer Clause issue
720
00:26:14,360 --> 00:26:17,159
with you know New York and Michigan and
721
00:26:15,799 --> 00:26:19,279
so forth this is the you know
722
00:26:17,159 --> 00:26:21,279
non-dormant Commerce Clause and they
723
00:26:19,279 --> 00:26:22,919
basic the judge basically said there's
724
00:26:21,279 --> 00:26:25,120
the Congress exceeded its Commerce class
725
00:26:22,919 --> 00:26:27,360
authorities and this law is
726
00:26:25,120 --> 00:26:29,600
unconstitutional however not all puppies
727
00:26:27,360 --> 00:26:32,720
and rainbows did judge found that it
728
00:26:29,600 --> 00:26:36,279
only applied to the specific plaintiffs
729
00:26:32,720 --> 00:26:38,720
in the case so finsen issued a report
730
00:26:36,279 --> 00:26:42,159
the day after saying okay the members of
731
00:26:38,720 --> 00:26:45,000
the nsba as of the date of the decision
732
00:26:42,159 --> 00:26:47,080
don't need a file the implication being
733
00:26:45,000 --> 00:26:50,440
that everybody who joins afterwards and
734
00:26:47,080 --> 00:26:53,480
everybody else in the world must report
735
00:26:50,440 --> 00:26:55,240
there's another case which is the NSB
736
00:26:53,480 --> 00:26:56,640
the National Small buiness Association
737
00:26:55,240 --> 00:26:58,960
Michigan which is like an affiliate
738
00:26:56,640 --> 00:27:01,440
entity they're also suing that's kind of
739
00:26:58,960 --> 00:27:02,919
still going through the courts however
740
00:27:01,440 --> 00:27:05,159
I'm as surprised as you are that there
741
00:27:02,919 --> 00:27:08,159
are no other major challenges one to
742
00:27:05,159 --> 00:27:10,559
this law and two um based on this
743
00:27:08,159 --> 00:27:13,000
holding it doesn't apply broadly right
744
00:27:10,559 --> 00:27:16,399
it seems like you as an organization
745
00:27:13,000 --> 00:27:19,159
maybe like you know the nciaa would sue
746
00:27:16,399 --> 00:27:21,159
but that would only apply to the members
747
00:27:19,159 --> 00:27:23,440
then there's no kind of broad ranging
748
00:27:21,159 --> 00:27:25,320
relief right now and then 10 days after
749
00:27:23,440 --> 00:27:27,760
that decision treasury already you know
750
00:27:25,320 --> 00:27:29,320
appealed the rolling the 11 circuit so I
751
00:27:27,760 --> 00:27:30,960
was you know kind of before this
752
00:27:29,320 --> 00:27:32,480
decision came out I was kind of telling
753
00:27:30,960 --> 00:27:34,360
clients oh just wait and see maybe
754
00:27:32,480 --> 00:27:36,159
someone will overturn this but even
755
00:27:34,360 --> 00:27:39,120
though it was overturned the decision so
756
00:27:36,159 --> 00:27:40,799
narrow that I I don't see how how how
757
00:27:39,120 --> 00:27:43,279
how useful this would be to everybody
758
00:27:40,799 --> 00:27:46,200
else well fascinating all right folks
759
00:27:43,279 --> 00:27:48,799
the CTA is here to stay comply or perish
760
00:27:46,200 --> 00:27:51,799
and yupon thank you so much for your
761
00:27:48,799 --> 00:27:56,000
time and attention and insights it was
762
00:27:51,799 --> 00:27:58,200
both wonderful and terrifying thank you
763
00:27:56,000 --> 00:28:00,799
Hillary and that concludes today's
764
00:27:58,200 --> 00:28:04,790
episode of the Cannabis law Now podcast
765
00:28:00,799 --> 00:28:09,030
until next time stay alert stay alive
766
00:28:04,790 --> 00:28:09,030
[Music]