Canadian financial regulators have issued a rare investor alert warning about the risks of buying stock in companies who want to jump into the medical marijuana sector.
The CSA issued a statement Monday “urging investors to be cautious when considering investing in medical marijuana stocks.”
Only one of Canada’s 20 government-approved licensed producers is publicly traded, but many junior mining companies and shell companies have seen their stocks climb after the mere mention of an interest in the sector. Some penny stocks have seen their shares double or even quadruple after announcing their intentions in the space
It is the first investor alert the Canadian Securities Administrators have issued since 2001, based on a scan of press releases by Huffington Post Canada.
“This is an issue that we decided needed to be addressed.… There’s a lot of news and a lot of focus on the sector right now, so that’s why it has been brought forward,” said Mark Dickey of the Alberta Securities Commission.
He noted that though medical marijuana is not the only industry that regulators have seen an alarming number of investors rush into, it is rare for the group representing Canada’s disparate provincial and territorial regulators to release a joint investor warning.
“We had observed that just the announcement of somebody about to develop a medical marijuana business could result in a stock jumping and there would be no basis for that.”
– Read the entire article at The Huffington Post.