NEW YORK (TheStreet) -- The Securities Exchange Commission issued an investor alert because of the increasing number of complaints about marijuana stocks. Since the beginning of March, the SEC temporarily suspended trading of five different companies for a variety of reasons related to the veracity of their claims to be involved in a marijuana businesses. Suspicions abound that some companies were simply an attempt to capitalize on the "green rush."
The five companies included FusionPharm (FSPM), Cannabusiness Group (CBGI), GrowLife (PHOT), Advanced Cannabis Solutions (CANN) and Petrotech Oil & Gas (PTOG). The SEC said two of the suspensions involved potentially illegal activity including unlawful sales of securities and market manipulation.
The SEC warned investors to look for the following:
- SEC trading suspensions
- E-mail and fax spam recommending a stock
- Insiders owning large amounts of the stock
- False or exaggerated press releases
The SEC also noted that most of these companies were microcaps that were traded on the OTC Bulletin board and don't have to meet any minimum financial standards. The SEC wrote, "Information about microcap companies can be extremely difficult to find, making it less likely that quoted prices in the market reflect full and complete information about the company."
FusionPharm is a Denver-based company that claims to make cultivation systems for cannabis growers. The SEC has suspended trading from May 16 to May 30 "due to a lack of current and accurate information about the company because of questions that have been raised about the accuracy and adequacy of publicly disseminated information concerning, among other things: (1) the company's assets; (2) the company's revenues; (3) the company's financial statements; (4) the company's business transactions; and (5) the company's current financial condition."