Wall Street’s industry-funded watchdog, FINRA (Financial Industry Regulatory Authority) warns against investment scams growing like weeds targeted for investors attempting to tap the growing marijuana industry in the US.
If you talk to anyone in the growing and selling medical marijuana, you will hear a lot of talk about risks, and security systems are expensive. It’s difficult to find a bank or insurance, but laws changed at the whim of regulators and legislators. And, because it still remains illegal, federal agents could shut down the operation and put the owners to jail.
Seattle-based Privateer Holdings is the first company to invest openly and raise $7 million from investors in the medical marijuana industry. Nearly 20 states have legalized the use of recreational marijuana for medical use. FINRA said, scammers are misleading investors by boosting thinly traded stocks and sell it to executives with criminal records.
As more states in the US are clearing the way to legalize the use of medical marijuana, the industry could reach up to $9 billion in five years. Marijuana is safe, far less addictive and subject to abuse compare to many drugs used as hypnotics, relaxants, and analgesics, which is one of its greatest advantage. Because of its little effect on major physiological functions, case of lethal overdose was known.
According to The Wall Street Journal Market Watch: The chief legitimate concern is the effect of smoking on the lungs. Cannabis smoke carries more tars and other particulate matter than tobacco smoke. But the amount smoked is much less, especially in medical use, and once marijuana is an openly recognized medicine, solutions may be found such as vaporization, tinctures, extracts and oils. At present, the greatest danger in medical use of marijuana is its illegality, which imposes much anxiety and expense on suffering people, forces them to bargain with illicit drug dealers, and exposes them to the threat of criminal prosecution.
Majority of these marijuana-related companies trades on over-the counter-markets that do not have the reporting requirements and liquidity of Nasdaq and the New York Stock Exchange.
Under the federal law, marijuana remains illegal, which limits the avenues for investments. However, private-equity firms have been buying medical marijuana companies whose investors are affluent individuals in anticipation of federal law changes. The risks are even greater in Illinois where Pat Quinn signed a bill into law allowing temporary, for-profit medical marijuana industry to sell to patients with certain conditions starting 2014.
Despite the risks, plenty of people are still willing to invest hundreds of thousands of dollars and several millions to get a shot at serving a new market. With marijuana investment scams growing like weeds, investors of marijuana-related stocks may see their profits go up in smoke.
Written by: Janet Grace Ortigas
Source: Market Watch