Federal Law Prohibits Banks, Escrow, and Title Companies from Participating in the Sale of Marijuana-Related Businesses

The sale and consumption of marijuana, both medicinally and recreationally, is a pretty controversial topic throughout the United States. Some view marijuana as a dangerous substance that should be banned, comparable to hard narcotics like cocaine or methamphetamine. Many others view marijuana as a substance that should have limitations (similar to the sale of alcohol and tobacco), but not be completely illegal. Then, there's the even deeper issue of medicinal versus recreational usage. Some believe that marijuana should only be used when absolutely necessary (i.e. as a diagnosed treatment for a legitimate medical condition like glaucoma or nausea caused by chemotherapy), and some believe that cannabis isn't dangerous enough to be limited much, if at all.

The main difference between cannabis and substances like tobacco and alcohol is a lack of information. While there has been plenty of research done on the health effects of tobacco (cancer, asthma, etc.) and alcohol (impaired motor skills, liver disease, etc.) and even the effects on a fetus, there really isn't enough evidence to make a conclusive ruling on marijuana. However, for a while, it didn't matter whether marijuana was healthy or not. It didn't matter if it could impair motor skills or give a smoker asthma, because the sale and/or consumption of marijuana was illegal in the U.S., both on a federal and state level.

Over a decade ago, several states (California being one of the first) began to legalize medical marijuana, which could only be purchased from a licensed dispensary with a prescription from a doctor. Then, much more recently, states began legalizing recreational marijuana usage. However, that doesn't mean much from a business standpoint, because although marijuana is now legal in California, it's still illegal according to federal law. That may change within the next several years, but as of this moment, the law is the law, and that's all there is to it.

Because marijuana is still illegal federally, many businesses that must comply with state law (such as escrow/title companies), are not permitted to participate in any transactions regarding businesses that handle the sale of marijuana. In fact, in April of 2017, several national title companies received a memorandum from the Office of the Chief Underwriting Counsel that if the title company gets any indication from a buyer, seller, or broker that the Land will be used for growing, processing, distributing, or dispensing any types of marijuana-based products, they aren't allowed to be involved in the handling of any escrow or other funds of any type, issue any type of zoning coverage, or issue title insurance (except with the inclusion of an exception related to violation of federal law). This policy even applies to an entrepreneur looking to buy property that they will then rent out to tenants who may be involved in the marijuana industry,

Federal laws are taken very seriously by businesses involved in escrow and the transfer of funds, including banks. Banks are federally chartered, insured by the FDI, and use the Federal Reserve wire system. If those banks start breaking federal laws (even laws that don't exist at the state level), the bank can lose its charter and FDIC insurance, and eventually get shut down altogether. Just like banks, escrow companies lose their legal ability to operate if they break federal laws, especially in the financial realm, and for most of those businesses, it simply isn't worth the risk of getting involved in any transaction that might violate federal law.

For that reason, escrow companies (just like title companies and banks) don't take part in transactions involving property (or businesses) that are connected to the marijuana industry. It can be next to impossible for an entrepreneur to start that kind of business with a loan from a bank, because banks won't provide the loans and title companies won't close the sale (a closing is usually required by a lender). However, in some situations (where the sale is an all-cash offer, with no financing), there are law firms with real estate experience that can close real estate transactions. As of now, federal law makes it nearly impossible to do business in the cannabis industry if you need bank financing or plan to go through an escrow company. The laws may change in the future, but for now, it is what it is.

***************************************************************************************************
Find out more about us at www.sepulvedaescrow.net. Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on Facebook, Twitter, LinkedIn, and Google+.

**************************************************************************************************

Verizon's Acquisition of Yahoo Slows Down, Pending an Investigation into Data Breaches

A previous post discussed how Yahoo Inc.'s financial difficulties had led the company's management to get more and more creative in trying to turn everything around. The post also mentioned that a sell-off might be Yahoo's only choice and that, if they did sell, Verizon Communications Inc. would be the most likely buyer. In the several months since that post was written, Yahoo had indeed decided to sell to Verizon. Unfortunately, while the deal was meant to close relatively quickly, Yahoo's recent data breaches have slowed down the proceedings and may lead to a withdrawal of Verizon's offer. In the meantime, however, as the Associated Press of the L.A. Times discuss in their recent article, Yahoo's profit margin has been expanding, even as its net revenue slips.

Even while dealing with the huge repercussions of their data breaches, Yahoo succeeded in improving their financial performance during the fourth quarter. In the fourth quarter of last year, losses were high, so it's good for the company that they have been able to cut costs enough to get some stability back. Over the past few years, Yahoo has been rapidly losing the online advertising market to more powerful competitors like Google. More precisely, Yahoo's revenue from ad sales fell by around 4% in the one quarter. While that may seem like a lot, it's better than the double-digit losses seen over the previous four quarters. Because online advertising is a large portion of the company's income, it makes sense that financial considerations are forcing them to close up shop.

Yahoo announced this week that the $4.8 billion sale of its internet operations is expected to be delayed for at least 3 months while Verizon performs more due diligence and Yahoo faces an investigation by the Securities and Exchange Commission regarding the security breaches. In not just one, but two attacks, hackers were able to gain access to Yahoo's servers containing email addresses, birthdates, and other personal information of more than a billion users. It wasn't just fact that the breach occurred that triggered federal interest; it was that the breaches happened years ago, in 2013 and 2014.

To investigators in the SEC, Yahoo's delay in releasing information about the breaches makes the company seem guilty. Although the SEC claims that Yahoo is complying with requests that the investigators and governmental agencies have made, there are still worries among customers that the company is hiding something. Because of those suspicions, Verizon seems to be slowing down the purchase, no longer sure whether they want to even buy the company anymore. If more negative information comes out after the sale, then Verizon will suffer the losses caused by people's uncertainty. They made the smart move in pushing off the sale by a few months, in the hopes that all of the bad publicity may die down by then.

***************************************************************************************************
Find out more about us at www.sepulvedaescrow.net. Any Questions? Contact our Escrow Expert! Sepulveda Escrow Corporation (818) 838-1831. Follow our company on Facebook, Twitter, LinkedIn, and Google+.

***************************************************************************************************