The S.E.C. suspended several major marijuana companies that publicly traded in the year 2014. The reason: questions in information accuracy regarding company operations. Two of the companies in question were suspected of illegal activity including unlawful sale of security and market manipulation. In fact, federal charges and a securities fraud class action lawsuit were filed against GrowLife, Inc by the Commission.
The federal government is apparently having a field day targeting these pot companies because they’ve built a history in making misleading disclosures. Even though the stock bubble has burst for marijuana, there are still plenty of publicly traded marijuana companies around claiming a good footing. With so many companies, it can be easy to see dividends no matter where you land.
The logic behind this is that marijuana is currently at an all time high and thus all marijuana businesses must be going up. Those who don’t know the industry too well might buy shares in visible companies because that seems to be the only way to really cash in.
Clearly, this is not a good idea. Just because a company has the brand of being OTC (over-the-counter), it doesn’t mean that it isn’t any good. Often, companies that do trade OTC do not need to go through strict reporting when on the stock market and as such, can get slip through the woodwork.
The OTC market has become a breeding ground for frauds, so make sure that you properly research a company before making any marijuana investment.