As trusted advisors in the cannabis industry, attorneys are counted on to provide legal guidance in a heavily regulated environment. Cannabis businesses that fail to retain legal professionals are doomed to fail.
Whether we’re discussing exciting new M&A opportunities or emerging markets and applicants hoping to win a multi-million-dollar license, attorneys are a necessary and fundamental part of establishing and maintaining a cannabis company.
Having said that, there are areas of differentiation in which attorneys aren’t always the ideal solution. For example, a tax attorney seldom makes a good bookkeeper. A securities attorney seldom makes an ideal CPA. Just as certain attorneys specialize in criminal defense while others are geared toward corporate or family law, specialization is key to choosing the ideal professional to service a cannabis business.
Similarly, attorneys are limited in their role as it relates to operations and cannabis compliance.
This isn’t to say they aren’t capable, by any means. An attorney is apt at legalese and the ability to read, interpret regulatory language, and defend administrative law. There are key and important roles attorneys must play in a cannabis business including:
- Establishing corporate structure and operating agreements
- Drafting, reviewing, and editing legally binding documents
- Providing legal advice on company agreements and legal affairs
- Defending and prosecuting litigation on behalf of the company
- Coordinating legal necessities and representing the legal interests of the business
- Defending cannabis licenses in the event of administrative hearings or criminal charges
While the old adage of complaining about the legal difficulties and costs of attorneys is all too true in the industry, these roles and responsibilities are often legally required and necessary for savvy cannabis companies to succeed.
However, there are many areas in the realm of operational compliance wherein attorneys and compliance experts differ and, though different, may actually be complimentary in their work together. Like a CPA and a tax attorney, compliance experts and attorneys go hand in hand to best serve their clients.
Compliance experts, for example, have more real-world experience in operating cannabis companies and, as such, their experience is fundamentally different than that of an attorney. They also provide more specialized service at a more affordable rate with more ongoing support that is capable of operating in multiple jurisdictions and markets.
Most lawyers have never worked in a facility planting clones, harvesting and post-processing plant material, tracking batches of product and extracting cannabinoids, ensuring accurate tracking and tracing of material in seed to sale systems, consulting patients and selling cannabis, or managing employees on a daily basis amid a complex operational compliance infrastructure.
In our experience at iComply, most attorneys are limited in their compliance role and may author or review SOPs or a licensing application to ensure basic regulatory requirements are met. Sadly, too often, attorneys are reviewing all too many operational documents once the license is on the line and they must defend the non-compliant actions of the company.
A compliance expert on the other hand, takes on more of an active role in the day to day operations of a company by ensuring that compliant SOPs are easily and effectively implemented, followed by staff, and kept up to date proactively. Compliance experts should integrate their findings into these operational procedures, track changes, and ensure that operational documents are complete, organized, and audited regularly.
This work actually supplements any need an attorney might have in defending a cannabis license by ensuring the legal ammunition is ready for a case file and that the foxhole is secure – metaphorically speaking. For a cannabis business, this saves both time and money in any investigation or case-file building and reduces the risk and cost of non-compliance.
Another area in which attorneys are limited comes down to ongoing, standardized compliance training for the staff members of cannabis businesses.
If a cannabis company were to hire an attorney to create this training, they may very well spend tens of thousands of dollars to do so and even more over time ensuring each new staff member is adequately trained. With the experience and core competency of a compliance firm, this compliance training is more affordable, easily accessible, and necessary for a cannabis business in building compliance mitigation.
Finally, a cannabis business needs to focus on its core competency to expand their business: growing, manufacturing, distributing, and selling cannabis is what they do best. Similarly, the ongoing core competencies of attorneys and compliance professionals should be focused on what they do best.
Over time, rules change, staff changes, and day to day operations become increasingly more difficult to keep on track and in compliance. Skilled and competent compliance firms should regularly and ongoingly measure and manage compliance for common clients.
This is standard practice in auditing for any other heavily regulated industry such as: banking, pharmaceutical, oil and gas, and food manufacturing. In doing so, cannabis clients know when audits are coming and can rely on experienced operational experts to comprehensively measure compliance and help remediate deficiencies before the regulators do.
For attorneys, these reports provide insight into the cannabis companies themselves to identify any legal necessities, flush out due diligence issues, and sanctify the operational compliance efforts of the company (should they need to defend the license) through third-party validation.
Budget-wise, cannabis companies will save money on cannabis attorney legal fees by ensuring there is no overlap in areas of expertise. In a world where there is a plethora of business and expanding markets, this bodes well for both the longevity of cannabis companies and the effective and efficient use of attorney time.
For Multi-State Operators, this is conceivably the only method by which to establish oversight on the entirety of the operations. As consultants, cannabis compliance experts are not beholden to a BAR license that limits them to one State’s laws at a time. Their guidance and experience is invaluable to providing multiple attorneys in multiple states a common page to read from for multi-state operators.
Cannabis companies would do well to differentiate their legal and compliance budgets for these reasons. At the “speed of weed”, we all need to work smarter, not harder, and attorneys would do well to find reliable and trustworthy compliance companies with which to partner for the mutual success and benefit of our common cannabis clients.
Lindsay M. Deen
Cannabis Policy/Regulatory Affairs