SEC to investors: Beware marijuana-related stocks

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The Securities and Exchange Commission (SEC) warned investors Friday about putting money into marijuana-related investments after the regulator had to halt trading in several companies recently.

The regulator said in an investor alert that it was seeing a growing number of investor complaints about the sector, and it warned that some might use the rapidly growing legal marijuana market to take advantage of investors.

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“We know from experience that fraudsters follow the headlines,” said Lori J. Schock, director of the SEC’s Office of Investor Education and Advocacy.  “Given the attention that marijuana-related companies have attracted recently, 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.”

On Friday, the SEC halted trading in the Denver company FusionPharm Inc. The company claims to make a professional cultivation system for cannabis growers, but the SEC froze investments in the company amid questions about the accuracy of information the company made public about its finances.

In the last two months, the SEC has also suspended trading in four other companies due to concern about the accuracy of their investor information.

Voters in Colorado and Washington recently agreed to legalize recreational use of marijuana, and 21 states plus the District of Columbia have voted to permit its use for medicinal purposes.