The Financial Industry Regulatory Authority or FINRA is dedicated to investor protection and market integrity through effective and efficient regulation of the securities industry.

FINRA is not part of the government. FINRA is an independent, not-for-profit organization authorized by Congress to protect America’s investors by making sure the securities industry operates fairly and honestly, by writing and enforcing rules governing the activities of more than 4,200 securities firms with approximately 630,000 brokers;  examining firms for compliance with those rules; fostering market transparency; and educating investors.

FINRA’s Warning to Investors

Recently, FINRA issued a warning to investors: Lay off the dope stocks.

According to FINRA, With medical marijuana legal in almost 20 states, and recreational use of the drug recently legalized in two states, the cannabis business has been getting a lot of attention—including the attention of scammers. FINRA is issuing this alert to warn investors about potential scams associated with marijuana-related stocks.

Empty Promises Through Promotions

One company, for example, promoted its move into the medical cannabis space by issuing more than 30 press releases during the first half of 2013. These releases publicized rosy financial prospects and the growth potential of the medical marijuana market. The company was also touted on the Internet through the use of sponsored links, investment profiles and spam email, including one promotional piece claiming the stock “could double its price SOON” and another asserting the stock was “poised to light up the charts!” Yet the company’s balance sheet showed only losses, and the company stated elsewhere that it was only beginning to formulate a business plan.

The warning was timely. The conversation surrounding the legalization of medical marijuana in the United States has been thrust into the spotlight, and, inevitably, as the the nation moves toward some federal-level referendum on the drug, the private sector has begun digging in, bracing for practical legalization (some would argue this has already happened).

Do Your Homework

But it is important to point out that while it is absolutely true that investors should always have their guard up and be particularly rigorous in their approach to penny stocks and marijuana stocks, not every company in the space is a pump-and-dump scheme. Investors should be able to tell the difference between a viable investment candidate and a scam by examining company fundamentals, reporting history, transparency, and management. Who is in charge? What type of company have they built? Are they square with the SEC? Are they audited? And are they trying to hide anything?

Guiliano Law Firm

The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Firm, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost to unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. If you own the common stock of TradeStation and purchased your shares before April 21, 2011, and wish to learn more about these claims, contact us at (877) SEC-ATTY

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