Brokerdealer.com blog update courtesy of extract from Oct 30 WSJ Risk & Compliance column by Greg Millman.
Two businesses that explicitly state they intend to cultivate and sell marijuana are hoping the Securities and Exchange Commission will soon clear their applications to register shares. Or not.
The SEC’S response to S-1 filings by Terra Tech Corp. and GrowBlox Sciences Inc., initiated in August and September, respectively, could show whether the agency is willing to accelerate the registration of shares of businesses that say they intend to break Federal law.
Both Terra Tech and GrowBlox are now pursuing the S-1 registration process because of contractual commitments to providers of capital who received convertible debt and/or warrants, according to their S-1 forms. SEC registration would allow the holders to sell their securities without meeting the conditions of Rule 144A, which “allows public resale of restricted or control securities” only after a holding period before the sale, and other conditions.
Although marijuana use has been legalized by 20 states, according to the Office of National Drug Control Policy, it remains illegal at the federal level.
Terra Tech’s board made a decision “earlier this year” to compete for permits to cultivate and sell marijuana in states that have such permitting regimes, according to Chief Executive Derek Peterson. The company previously filed two S-1s in 2013. While they were in process, the SEC asked whether the company’s business model violated federal law, and “we responded that were just selling equipment at that point. They were comfortable with that at the time,” said Mr. Peterson. On both of those S-1s, the SEC responded favorably to Terra Tech’s request to accelerate, that is, to allow the filings to become effective without a waiting period.
For the full article from the WSJ, please click here