Jacob Securities, founded in 2006, was a pioneer in the Canadian cannabis industry, helping to raise capital for many companies. The firm was one of the two underwriters for Tweed’s April 2014 offering and held an investment conference last summer at the Trump International in Toronto. Analyst Khurram Malik has been one of the most extensively quoted sources of industry information in the Canadian press. On November 10th, the company announced the Jacob Capital Management Capital Fund:
The fund will target both private and public investments across the global cannabis value chain with a particular focus on opportunities in the United States and Canada. This first fund will have a maximum size of C$50,000,000.
The company disclosed that Cheryl Shuman, who the firm stated “has been involved in the building of over 1,700 cannabis related businesses”, and George Smitherman, a former deputy premier of Ontario, had been selected as senior advisors.
On December 17th, the company was suspended as a member of the Investment Industry Regulatory Organization of Canada (IIROC), a self-regulatory organization that oversees investment dealers. It ordered the company to immediately cease dealing with the public. Two days later, Jacob Securities communicated that it would no longer be an investment bank but rather would turn to offering advisory services, operating outside of the regulatory authority of IIROC.
In a document released by IIROC on January 27th that explained the many reasons for the suspension, it is clear that the proposed cannabis fund played a role:
IIROC alleged that JSI announced a Cannabis Fund on November 10, 2015, without requisite registration approvals and named an auditor who alleged that it had not been engaged for the offering.
While the fund is not a viable venture, Jacob Securities is now operating as Jacob Capital Management and will earn 1.5mm shares in publicly-traded Alta Vista Ventures (CNSX: AVV) to help it consummate its acquisition of licensed producer RedeCan, with the possibility of earning an additional 2.5mm shares if the deal closes successfully. George Smitherman also joined the Board of Directors at Alta Vista Ventures.