FINRA issues noxious weed alert
Although the Financial Industry Regulatory Authority has previously warned investors of potential scams involving the drug industry, the Investor Alert issued today reaches a new high.
In “Medical Marijuana Stock Scams”, FINRA notes that the recent legalization of recreational marijuana in Colorado and Washington state (home of Knowledge Mosaic!) and the legal use of medical marijuana in 20 states plus the District of Columbia has drawn the attention of the nefarious. Noting that the CEO of one medical marijuana firm “spent nine years in prison for operating one of the largest drug smuggling operations in U.S. history,” FINRA suggests potential investors check the Federal Bureau of Prisons Inmate Locator to determine if a solicitation is coming from someone who has served time. The use of state prisoner locator systems is additionally recommended.
FINRA also suggests checking the EDGAR database to confirm that a solicitation is coming from an SEC-registered company. A search of Knowledge Mosaic’s SEC Filings page reveals 1381 “medical marijuana” filings — including one from a firm located on South Rainbow Avenue. Another claims in bold letters that “Marijuana May Be a $45 Billion Annual Industry”.
Most SEC filers disclaim any intention of actually selling cannabis. They instead focus on, for example, engaging in research, developing new products, and providing distribution support. Nonetheless, the risk factors noted in at least one registration statement acknowledged the obvious: marijuana remains illegal under federal law and is a Schedule-I controlled substance. The filer also discussed a logical consequence of the growing acceptance of medical marijuana: pushback from the established and powerful pharmaceutical industry.
Regulators may not be alone in viewing marijuana as a noxious weed.