The Ontario Securities Commission (OSC) has issued a warning about being attracted to the latest ‘hot’ investment trend in a report titled, “Beware of the latest thing.” The OSC warning explains that it is natural for people to be attracted to investments offering methods to profit quickly, but that “big payouts come with big risks.” The warning is similar to other reports from financial regulators where they advise customers to understand the risks before investing and ensure that they are in fact legit financial offerings and not unregistered frauds.
Among specific sectors that the OSC noted as being marketed heavily and “ones to watch your wallet around” were binary options, Forex trading and marijuana related investments. The inclusion of binary options on the list is of little surprise as the OSC has issued numerous warnings against both regulated and unregulated brokers that are marketing to Canadian clients without proper licensing in the country. Providing another warning on the sector, this time around they added, “Take note: promises on certain binary option websites that “even if you lose the trade, you do not lose money” are false. Disclaimers in small print on the same websites clearly state that you can lose all or a portion of your money.”
More surprising was the mention of Forex trading and marijuana investments. In regards to Forex, the OSC didn’t single it out negatively as it did for the operations of binary options brokers, but focused on risks. Specifically, they stated that customers should know the risks, as there exists the potential for large gains and also risks. The inclusion of Forex though, without warning about unscrupulous actions from brokers, would seem to indicate that the OSC is seeing a consistent flow of customer complaints of losing money in Forex. However, the losses may be occurring in a legal fashion.
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Most interesting was the mention of marijuana related investments. According to the OSC, new Canadian rules providing a framework for growing and selling medicinal marijuana is developing a new market related to the plant. But, the OSC warned that the laws require firms involved in growing and selling marijuana to be licensed, which is costly, and companies raising money in such businesses are risky. What is interesting about the warning is that it comes shortly after medicinal marijuana laws went into effect in Canada on April 1st of this year. The quick warning relates that investment marketers have been quick to jump on the marijuana bandwagon, and tabbing it as one of the ‘next big things.’
While the OSC focused on the risks of growers and sellers, professional investors funding ‘potreprenuership‘ have been targeting other subsets of the marijuana industry that are viewed as less risky. Such companies include firms creating delivery services for medicinal marijuana and sellers of agricultural equipment.