The Securities and Exchange Commission (SEC) has warned the public to be vigilant when investing in marijuana companies due to the increasing prevalence of investment fraud and market manipulation, adding that the SEC’s Office of Investor Education and Advocacy regularly receives complaints about marijuana-related investments.
Regulators stated that investments offering a guaranteed high rate of return with little or no risk should be treated with suspicion. Other cautionary warnings included unsolicited offers made either through email, social media or over the phone. The SEC advised investors to conduct thorough background checks of anyone recommending marijuana investments, including their registration and license status, previous trading suspensions, and companies that have underwent abrupt changes in their name, business plan or industry. Investors were also reminded of the legal status of marijuana in U.S. and the risk of criminal prosecution as marijuana is technically still illegal in the U.S.