Tomahawk, WI 05/18/2014 (Basicsmedia) – The Securities and Exchange Commission warned investors in microcap companies of probable fraud. The issued warning concerns companies that allege that they are involved in marijuana related activities after the agency shelved trading in five of these companies.

The agency has cautioned investors about frauds entailing marijuana related investments, warning that some people are exploiting recent growing trends in the marijuana industry while promising investors high returns on investments. The alert further emphasizes the little knowledge that investors might have access to, related to these companies, given the fact that some of these companies are not required to report the SEC. The limited insight in the management, finances and services of these companies give significant scope for profits to fraudsters.

Incomplete Disclosures

As markets opened on May 16, the SEC issued a suspension in trading of Denver based FusionPharm Inc., which alleges to undertake a professional system of cannabis cultivation. It was suspended as the SEC doubts the exactness of its assertions regarding its assets, earnings, finances and business deals.

Over a period of only two months, the SEC has suspended trading of five such companies including Irvine, Woodland Hills, Colorado Springs based Advanced Cannabis Solutions Inc., Bedford, Texas-based Petrotech Oil and Gas Inc (OTCMKTS:PTOG). Two other companies that were suspended are California based companies- GrowLife Inc (OTCMKTS:PHOT) and Cannabusiness Group (OTCMKTS:CBGI).

Protecting Investors

The agency’s Enforcement Division searches the microcap market to point out companies that it suspects having propagated inappropriate public information. The unit seeks to protect investors from frauds by acting immediately to any misleading or incomplete disclosure. The SEC bears the authority to suspend activities related to any such company. In accordance with the federal securities laws, the agency has the authority to halt trading for a particular stock for 10 days. It usually disallows any broker dealer to make any transactions with soliciting investors until some reporting mandates are fulfilled.

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