Source:  MainStreet, -Written by Marguerite Arnold June 1 2014

NEW YORK ( MainStreet) — The SEC issued a strongly worded investor alert in mid May warning investors about the potential for fraud committed by publicly traded companies in the cannabis sector.

The move comes on the heels of the suspension of two more companies for the year, making seven total publicly traded stocks in the vertical the SEC has suspended from trading so far this year. Those companies are Aventura Equities (AVNE), Citadel EFT (CDFT), FusionPharm (FSPM:US), Cannabusiness Group Inc (CGBI), GrowLife (PHOT) , Advanced Cannabis Solutions (CANN) and Petrotech Oil and Gas Inc (PTOG).

Cannabis Connected Company Temporarily Suspended From Trading By SEC

The SEC said in the alert it issued on May 16 that its actions were prompted because of its concerns that there are “[q]uestions regarding the accuracy of publicly-available information about these companies’ operations.” For two of the companies, the SEC levied trading suspensions also based on potential illegal activity — “unlawful sales of securities and market manipulation.”

At the time of the suspension also issued on May 16, FusionPharm’s one-year returns (mostly boosted in the last quarter) were up 670%. The stock had also just been mentioned by the so-called ” Wolf of Weed Street ,” a so-far anonymous day trader in marijuana penny stocks with a pithy Twitter handle, a catchy if ribald rap “sales pitch” on YouTube and a self-described background in disaster relief. He did not return a request for an interview by time of publication. FusionPharm was suspended the day after “The Wolf” suggested to his followers via his widely watched Twitter feed that the company was a solid buy. The trader also owns stock which has been disclosed fairly widely at this point .

FusionPharm makes cultivation systems for the cannabis industry. Like others in the vertical, its stock price rose dramatically in March of Q1. This kind of market activity was also the reason for previous SEC suspensions, and has so far appeared to take place unilaterally, without notification of the companies being suspended.

GrowLife, whose stock was also temporarily suspended in March, is a specialty hydroponics growing company. The company has subsequently made both leadership and infrastructural changes. When reached by email and Skype, new CEO Marco Hegyi – a former IT executive — was upbeat.

“Restructuring the leadership team, including executive departures, were discussed far in advance of the SEC suspension,” he said. “Both Sterling Scott and Rob Hunt left the company on their own accord, and gave advanced notice to ensure a smooth transition.”

He also explained why the company did create greater investor transparency measures.

“GrowLife enabled the investor hotline following the SEC suspension to ensure that those who’ve supported, our investors, had our support as well during this unforeseen situation,” he said.

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Article source:  http://business-news.thestreet.com/philly/story/sec-warnings-and-suspensions-impact-cannabis-related-company-policy-leadership/1?page=2