As more of the banking industry starts to take pot stocks seriously, Toronto-Domino Bank (NYSE:TD), better known as TD, is taking a more conservative approach with its investors. According to a report by Profit Confidential, TD sent out an email stating that they will limit their financial advisors to recommending three cannabis stocks.
The three companies who made TD’s pot stock cut include Canopy Growth Corp (OTCMKTS:TWMJF, TSE:WEED), Emerald Health Therapeutics Inc (OTCMKTS:EMHTF, CVE:EMH), and Emblem Corp (OTCMKTS:EMMBF, CVE:EMC) according to Profit Confidential.
Unclear Selection Criteria
TD cites “concern over federal law in the U.S. has forced them into that position” as reported by Profit Confidential. While the fear of the United States federal government’s stance on marijuana is common in the industry, questions have been raised about the criteria for TD’s recommended cannabis companies. As pointed out by Profit Confidential “these three companies do not currently have any holdings in the U.S., a number of other marijuana companies are in similar positions and yet are still on the TD marijuana “banned” list.” One of those companies includes Horizons Marijuana Life Sciences (TSE:HMMJ).
A financial services company based out of Canada, Horizons Marijuana Life Sciences launched April of last year as “the world's first and largest Marijuana ETF” according to Nasdaq. In its first year the company “brought in significant assets under management” which includes a 59 percent one-year return making them “best performing Canadian-listed ETF during this timeframe" according to Nasdaq. In addition to their strong performance, TD has a relationship with the company. In fact, TD happens to be “the most active broker” in the Horizons Marijuana Life Sciences (TSE:HMMJ) index” according to Profit Confidential.
The Evolving Relationship Cannabis between Finance
Like other banking institutions, TD is still trying to figure out how to navigate the murky waters of finance in the cannabis industry. This was made evident when they reportedly sent an email mandating its advisors to “tell their clients that federal law prohibits marijuana in the U.S. and that marijuana stocks with holdings in the U.S. could, therefore, be subject to legal risks” per Profit Confidential.
Last month, during their annual shareholder's meeting, TD CEO Bharat Masrani made it clear that the company was going to hold off on entering the cannabis finance sector until recreational use becomes legal per 660 News. In the same 660 News story, Masrani explained that Canada’s pending legalization of recreational marijuana would be an “important data point” in determining when the company “would consider participating in cannabis sector.”
The announcement of the three companies shows that the TD has softened its position.