While marijuana-related investments grow in popularity, the SEC has reportedly received more associated complaints from investors. As a result, the Securities and Exchange Commission warns individuals to be mindful of certain risks before investing in marijuana-related companies. The SEC released an investor alert with this warning after medical marijuana company owner, Richard Greenlaw settled charges for allegedly offering and selling unregistered securities to 59 investors. Signs of fraud reportedly include unlicensed, unregistered sellers; guaranteed returns; and unsolicited offers. Chiefly, Richard Greenlaw was not registered nor licensed to sell his marijuana-related investments with the Securities and Exchange Commission.
The SEC complaint, filed with the United States District Court of Maine charged the owner of NECS, Richard Greenlaw and his 20 cannabis-related entities for violating the registration provisions of federal securities laws. The 20 cannabis-related entities charged in the SEC complaint are NECS LLC, MaineCS LLC, VTCS LLC, MassCS LLC, NHCS LLC, RICS LLC, CTCS LLC, FLCS LLC, ILCS LLC, IACS LLC, LOUCS LLC, MICS LLC, MNCS LLC, NDCS LLC, NJCS LLC, NYCS LLC, OHCS LLC, PennCS LLC, UPCS LLC, and WICS LLC. It is alleged that Richard Greenlaw posted advertisements on Craigslist to offer and sell subscription agreements for securities in his companies. In response to these charges, Mr. Greenlaw agreed to pay $400,000 and accept permanent injunctions from further violations of Section 5(a) and 5(c) of the Securities Act of 1933.
Federal securities laws mandate that any offer and sale of a security must be registered with the SEC. A company registers a security by filing financial statements, business descriptions and other legally required information with the SEC. Otherwise, the securities offering must be found to be subject to exemption under Securities Act 1933. Offerings of securities that can be exempt include those of limited size, intrastate, private and more. Exemption requirements may also require that securities be only sold to accredited investors. Thus, investment salespersons would be prohibited from selling exempted securities to any investors who do not meet the requirements. In this case, Mr. Greenlaw’s marijuana-related investments were not registered nor qualified for exemption.
Investors can take steps to avoid becoming victims of potential fraud with marijuana-related investments and other securities by staying mindful. It is essential to perform diligent research before investing, especially after finding a marijuana-related investment opportunity on Craigslist or any other internet website. Through a simple search, anyone would have discovered that Richard Greenlaw was not an authorized seller of securities. The SEC has repeatedly reminded investors to only work with a licensed and registered investment professionals or firms. On August 14, 2018, the SEC issued an Investor Alert warning investors to check the background of anyone selling an investment, especially for their license and registration status.
There is a plethora of resources that investors can use to find free information about an investment professional and company easily. Investors can use the internet to find an investment professional on Investor.gov, Smartcheck.gov, and FINRA’s BrokerCheck . Alternatively, investors can contact their state securities regulator using the corresponding phone number and addresses listed on the North American Securities Administration Association. The Securities and Exchange Commission also has a toll-free investor assistance line that investors can call to get assistance with finding an investment professional’s background. Additionally, investors can find a company’s registration documents by checking the SEC’s EDGAR database online.
Securities fraud attorneys recommend that investors thoroughly research the background of anyone selling investments to safeguard against similar activity. Experience shows that increasing interest in an industry or product like marijuana can potentially attract greater fraudulent activity. Fortunately, federal securities laws help hold unscrupulous brokers guilty of misleading investors about investment opportunities accountable. Individuals who have incurred losses because of a brokers’ misconducted related to marijuana-related investments should seek justice. Our securities attorneys have experience with helping investors recover their money lost as a result of a broker-dealer’s registered representative’s misconduct. If you would like more information and legal assistance, contact our securities fraud attorneys.