Investors Warned By Securities Regulators About Medical Pot Plays

Canadian securities regulators are urging investors to do their due diligence when investing in medical marijuana firms. (CP)

A significant number of reporting issuers have announced their intention to begin growing and selling medical marijuana, in conjunction with new regulations enacted by the Government of Canada as of April 1, 2014, the council said.

While some have touted medical marijuana as a significant new sector for investment, the CSA has observed a number of small or inactive reporting issuers announcing medical marijuana business plans. Health Canada no longer grants medical marijuana growing licences to individuals, but is issuing licences to commercial growers that meet requirements of the Marijuana for Medical Purposes Regulations.

The council said, in many cases, simply the announcement of an intention to develop a medical marijuana business has caused an immediate increase in a company’s stock price. The council is concerned investors may face financial harm by purchasing shares at inflated prices before there is a viable business.

Investors should be aware that companies cannot legally conduct a medical marijuana business without a licence from Health Canada, and that there is likely significant time and cost required to obtain such a licence. Wiltshire said the council warning was prompted by a similar alert from the United States Securities and Exchange Commission about possible scams involving marijuana-related investments.

They’re having issues down there, she said. The U.S. commission, which recently issued temporary trading suspensions for five companies, claiming their operations relate to the marijuana industry, said fraudsters often exploit the latest growth industry to lure investors with the promise of high returns.

To read more, visit http://thechronicleherald.ca/business/1215682-securities-regulators-warn-investors-about-medical-pot-plays

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