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Beware 'hot' stock tips on marijuana businesses, experts warn

By Jasen Lee | Posted - Feb 20th, 2014 @ 9:25am

SALT LAKE CITY — The state Division of Securities is warning Utah investors to be on the lookout for investment pitches that may use medical marijuana businesses in other states as the basis for “hot” stock tips.

Following an announcement last week by the White House that federal banking institutions will accept payments from medical marijuana dispensaries, regulators are concerned that scam artists may be looking to profit from the public’s trust.

“Before you jump into an investment promising high returns on medical marijuana, check out the sources selling it with the Division of Securities,“ said Francine Giani, executive director of the Utah Department of Commerce.

“If you rush into marijuana‐related stocks without doing your homework, your savings may go up in smoke,” she said.

Officials warned that promoters may use a variety of marketing platforms to push false and misleading information about medical marijuana stocks, including through social media.

Fraudsters tend to use classic “pump and dump” scenarios to create demand for shares in a worthless company, then dump the stock after it peaks, Giani said.

Investors are urged to research the stock and company thoroughly, know what market the stock trades on, read the company's Securities and Exchange Commision filing if it's available, and be wary of frequent changes to a company's name or business focus.

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