~ The Promise of High Returns May Leave Some Investors Feeling Dazed and Confused When Their Investment Goes Up in Smoke ~
Marijuana legalization has attracted a lot of attention recently and is getting a lot of press coverage. Medical marijuana is legal in almost 20 states, and recreational use is legal in two, including Colorado. However, fraudsters often follow the headlines and look to exploit the latest innovation, product, or growing industry (no pun intended!) – in this case, marijuana. Not surprisingly, there has been an increase in the number of investor complaints regarding marijuana-related investments.
Tips to Avoid Marijuana-Related Scams
- Ask “Why me?” Ask yourself why a total stranger would tell you about a great investment opportunity. The answer is there is likely no opportunity, and the promoter is probably being paid or is a substantial shareholder who will profit handsomely if the company’s stock price rises.
- Consider the source. Be skeptical about companies that issue a barrage of press releases and promotions in a short time period. They may be trying to pump up the stock price. Also be wary of information that only focuses on the stock’s upside with no mention of risk.
- Do your research. Search the names of key corporate officials, major stakeholders, and the company. Proceed with caution if you find recent indictments or convictions, investigative articles, corporate name changes, or any other red flags.
- Read the company’s SEC filings, if available. Most public companies file reports with the SEC. Check the SEC’s EDGAR database and verify any information you’ve heard about the company. Remember, just because the company has registered its securities and filed reports does not mean it will be a good investment or the right fit for you. Call us if you have questions.
- Be wary of frequent changes to a company’s name or business focus. Name changes and the potential for manipulation often go hand in hand. Name changes can turn up in company press releases, internet searches, or possibly the SEC’s database.
- Check out the person selling the investment. A legitimate investment salesperson must be properly licensed, and his firm must be registered with FINRA and a state securities regulator.
If you believe that you have come across one of these marijuana-related investment schemes, contact us. The Colorado Division of Securities can be reached at 303-894-2320.