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Name: Kevin Conroy
Title: Partner and Chairman, Cannabis Practice, Foley Hoag
Age: 46
Years of experience: 19
As a partner and chairman of the cannabis practice at the Boston-based law firm Foley Hoag, Kevin Conroy represents cannabis-related operators and investors in all aspects of their business including corporate formation and transactions, not-for-profit regulation, employment matters, trademark matters, banking and finance issues, coordination with federal regulations, legislative issues, business and regulatory disputes and real estate transactions.
Conroy was the Massachusetts deputy attorney general between 2010 and 2012, assisting former Attorney General Martha Coakley in the overall management of the Attorney General’s Office and supervising civil matters in the office. Prior to that role, he completed stints as the chief of the Attorney General’s Business and Labor Bureau and as general counsel at the New England Council, a business trade group focused on economic development issues in New England.
Banker & Tradesman caught up with Conroy to discuss the relationship between financial institutions and the marijuana industry.
Q: How did you get into the cannabis business? What do you like about it?
A: Because much of the cannabis business is interacting with local, state and federal regulators, representing cannabis businesses was a natural fit for me and Foley Hoag. We started representing cannabis companies looking for medical licenses in 2014 and then our practice increased significantly after the adult-use referendum passed in Massachusetts in 2017.
I love that the law and the regulations in this industry are so new and are constantly evolving. Nearly everything we do has not been done before, which requires significant creativity on a daily basis. I also love the clients in the industry who recognize that because of the federal uncertainty, compliance with state laws and regulations is paramount. Because of this, clients are eager to make us part of their daily operations.
Q: What is the most important thing financial institutions need to consider before deciding to bank marijuana businesses?
A: Financial institutions that choose to bank cannabis businesses need to understand and implement procedures in order to be compliant with federal law and regulations. This is an initial heavy resource burden for financial institutions, but it is doable as many institutions across the country have shown. Financial institutions should also ensure their marijuana customers have state licenses and are in compliance with those state licenses.
Q: It has been reported that Century Bank is charging its marijuana clients $5,000 per month. How lucrative might this industry be? Is it worth the regulatory headaches?
A: You will need to ask Century Bank, but from my perspective, Century Bank has taken an intelligent risk to bank the medical cannabis industry in Massachusetts and I expect they have profited because of that. Right now, Century Bank is the only option for an industry that has revenues in the hundreds of millions of dollars in the commonwealth and will grow to a multibillion-dollar industry with the introduction of adult use.
Although Massachusetts cannabis businesses do pay significant fees to Century Bank, these businesses are pleased to have a banking option, understand that cannabis banking requires significant compliance and will continue to pay the fees as long as Century Bank accepts their business. The hope for the industry is that other banks are willing to take the intelligent risk that Century Bank did.
Q: If more financial institutions are to accept marijuana deposits, do you think it’s necessary for the federal government to delist cannabis as a schedule 1 drug?
A: The industry was pleased that Sen. [Elizabeth] Warren filed legislation to make cannabis legal on the federal level in those states that have cannabis programs. Short of an act of Congress, the industry needs federal banking regulators to change their policies so that banks are no longer required to report the transactions of state licensed cannabis companies. This reporting requirement makes no sense because federal prosecutors are not targeting state-licensed cannabis companies. Removing this requirement will likely encourage more financial institutions to bank the industry.
Conroy’s Five Things to Watch in the Massachusetts Cannabis Arena:
- Will the cannabis industry be able to produce and will the regulators issue enough licenses to meet the initial demand?
- Will banks serve the multibillion-dollar industry?
- After seeing the revenues that pour into municipalities that embrace cannabis businesses, which Massachusetts municipality will be the first to undo its cannabis ban?
- Will the regulators allow adult use delivery?
- How long will it be before our neighboring states recognize that they are losing significant revenue to Massachusetts by not legalizing adult-use cannabis?
