Pubdate: Wed, 21 Aug 2013
Source: Los Angeles Times (CA)
Copyright: 2013 Los Angeles Times
Contact:  http://www.latimes.com/
Details: http://www.mapinc.org/media/248
Author: Andrew Tangel

MARIJUANA STOCKS ARE DICEY, SAYS REGULATOR

NEW YORK - Scammers may be jumping into the weed business.

A securities industry regulator warned Tuesday that investment 
pitches touting marijuana stocks may be thinly disguised Wall Street 
"pump and dump" schemes.

The Financial Industry Regulatory Authority warned investors to 
beware of unscrupulous promoters pushing penny stocks via email and 
Twitter. As soon as investors pile in, promoters dump the shares and 
strand victims with sometimes sizable losses.

One unnamed marijuana company was promoted with breathless pitches 
exclaiming that the stock "could double its price SOON" and was 
poised to "light up the charts."

The hype came even though the company was losing money and 
acknowledged that it had yet to form a business plan.

Finra stopped short of publicly identifying specific alleged frauds. 
But it has seen an uptick in spam email and Internet promotions of 
marijuana-focused penny stocks with questionable finances, said Gerri 
Walsh, Finra's senior vice president for investor education.

"Whenever there's a next big thing, we see fraudsters swimming like 
sharks trying to get in on the action," Walsh said. "And that appears 
to be what's happening here."

Finra, which is the financial industry's self-regulatory body, urged 
investors to question the motives behind stock touts. It also advised 
investors to read regulatory filings with the U.S. Securities and 
Exchange Commission.

Investors also should research company executives and the brokers 
pitching the stocks.

Finra noted that two pot-focused companies have criminal histories. 
One executive spent nine years in prison for his role in a 
drugsmuggling operation and another was indicted in a Ponzi scheme. 
The alert did not identify them.

Some industry executives have expressed exasperation with the 
checkered pasts of others involved in the burgeoning marijuana field, 
complaining it makes it harder for their companies to gain legitimacy.

The Los Angeles Times reported this year that upstart cannabis 
companies have tried to tap the stock and bond markets. Those 
companies generally focus on legal accouterments for growing 
marijuana, such as hydroponic equipment.

Investing directly in marijuana production itself raises many legal 
issues. Only about 20 states have legalized pot for medical use, and 
only two for recreational use. The federal government, meanwhile, 
still classifies it as an illegal drug.
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MAP posted-by: Jay Bergstrom