SEC Warns Investors About Marijuana Stocks After Suspensions

The U.S. Securities and Exchange Commission is warning investors about potential fraud committed by public companies that claim to operate in the marijuana industry.

The investor alert, which was issued Friday, was released after the SEC suspended trading of a fifth cannabis company in the last two months.

“Recent changes in state laws concerning medical and recreational marijuana have created new opportunities for penny stock fraud,” Elisha Frank, co-chair of the SEC Enforcement Division’s Microcap Fraud Task Force, said in a press release.  “Wherever we see incomplete or misleading disclosures, we act quickly to protect investors.”

On Friday morning, the SEC suspended trading of Denver-based FusionPharm Inc., which makes cultivation systems for the cannabis industry.

According to the SEC, trading was halted due to “questions that have been raised about the accuracy of assertions by FusionPharm” concerning the company’s assets, revenues, financial statements, business transactions and financial condition.

The suspension comes on the heels of similar suspensions to GrowLife Inc., Cannabusiness Group Inc., Petrotech Oil and Gas Inc. and Advanced Cannabis Solutions Inc.

In the warning, the SEC said that companies trading on the over-the-counter market – where most cannabis companies trade – carry substantially greater risk for fraud.

“Microcap stocks are particularly vulnerable to fraudulent investment schemes because there is often limited publicly-available information about microcap companies,” it said.

 

10 comments on “SEC Warns Investors About Marijuana Stocks After Suspensions
  1. Aaron on

    Is the SEC usually this quick to action to protect people when marijuana isn’t involved? It seems like they could have done a world of good had they been this vigilant and efficient back in 2008.

    Reply
  2. Craig on

    I think this is a good thing by the SEC. This sounds more like the SEC is wanting to legitimize Canna businesses and impose the same scrutiny as other company’s looking to list. Especially where the investor-to-be is hoping to ride-the-wave and issuers (good and bad) are a plenty. I have already seen some stale shelf-registered companies look to swoop into this market (by doing a reverse merger) to bolster their stock (which has been dead for too long). IMHO (and not a legal one), this scrutiny is needed especially to help legitimize in other regulated business areas (like interstate banking).

    Reply
  3. carl on

    is the SEC gonna give back the amount of money you invested and had grown to size once they suspend the stock or do i just lose it because of the SEC ‘s actions ?

    Reply
  4. John on

    Simply put, Its corruption on both sides of the fence. I lost $$$ from Growlife shutdown. The SEC said it was not even investigating them. Just trying to ruin them and all involved.
    Don’t believe it just because they say it so….

    Reply
  5. linda warren on

    WOW!!! Banksters/Wall Street fraud…?The market crashed in 2008…too big to fail…too big to jail…Does anyone see a bit of hyper vigilance at the SEC…Greed is the answer any time the opportunity to make rapid $$$$$$ this is the bitch we will see So as the old saying goes..buyer beware!!!!!

    Reply
  6. Windy City on

    I see the SEC working to the benefit of marijuana investors as well. There will be ample opportunities as more and more industry related ventures start popping up…

    Reply
  7. Joe on

    How about leaving the MMJ companies grow and worry about real problems like Enron. Oh yeah, u missed that one. Cigarettes cause cancer but they are okay. A company wants to sell Medical Marijuana to help patients and they are crooks and need halted. What a joke. Do your job and quit worrying about Political agendas. Two words: Bernie Madoff.

    Reply

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