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SEC Warns Investors About Marijuana-Related Investments

After suspending trading of five different companies within the marijuana industry during the past two months in order to investigate the accuracy of assertions concerning their assets, revenues, financial statements, business transactions, and financial condition, the SEC has issued an investor alert warning investors about this new area of penny-stock fraud.

Because microcap companies such as the marijuana-related entities are not required to file reports with the SEC, the Microcap Fraud Task Force of the SEC Enforcement Division has been proactive in their investigations; “when publicly available information is scarce, fraudsters can more easily spread false information about a company, making profits for themselves while creating losses for unsuspecting investors.”

As Lori J. Schock, director of the SEC’s Office of Investor Education and Advocacy states, “we urge investors to exercise caution when looking at investments in this space.  Always thoroughly research the company – and the person selling the investment – before making a decision.”

For more information and a description of the five companies suspended you can read the full alert here.