Owning Marijuana Company Stocks Could Endanger Your Security Clearance

Green cannabis leaves and 100 dollar bill on the wooden table

Do you invest in the stock market? Do you invest in mutual funds, index funds, or Exchange Traded Funds (ETFs)?

If the answer is yes, and you have a security clearance, you should be careful what you invest in.

Recently, some folks have reported getting an email from their commands and employers saying the following:

Be advised that the DoD Central Adjudication Facility [CAF] negatively views personal investment (i.e. stock purchases) in companies that manufacture/sell/distribute marijuana. This means your security clearance may be negatively affected if you own stock in such companies.

DISCUSSION: As you know, many states have legalized the use/sale of marijuana. Some of the companies involved in this new business have begun to sell shares of stock to investors. While these companies are operating legally under state law, the CAF does not recognize any exception or mitigation for "passive investment" in what is still a criminal activity or enterprise under federal law. Such activity also violates [Director of National Intelligence] and DoD policy that recognizes the supremacy of federal criminal law on marijuana possession and sales. Ownership of stock in these type of companies is recognized by CAF as a security issue under their Adjudicative Guidelines, and puts your security clearance at risk.

What does all that mean? Well, if you have a specific stock or fund that invests in marijuana companies, you should probably get rid of it ASAP.

Depending on your situation, you must report all financial holdings on your SF-86 or SF-714 when you apply for a clearance, renew your clearance, or upgrade a clearance. Clearances now undergo continuous evaluation, so your ownership of such stocks may pop up and raise a big, red flag at any time.

According to the email, if your clearance is reviewed and you are found to own marijuana stock, you could lose your clearance (and quite possibly your job). You would have no recourse.

Are Marijuana Stocks That Widespread?

If you own a whole market index fund, you are pretty much guaranteed to own marijuana stock. Currently, there are more than 300 publicly traded marijuana stocks and funds on U.S. markets, and even more worldwide. If you have a mutual fund, index fund, ETF or even single stock, it could be very hard to know if you have an investment in marijuana companies. Many funds' holdings change on a daily basis.

For example, Altria (NYSE:MO), parent company of former tobacco giant Philip Morris, holds equity investments worth $2.4 billion in international cannabis producer Cronos Group Inc. (NASDAQ:CRON). Should you invest in it and take a chance with your clearance? Your call.

In fact, it is possible that some Thrift Savings Plan funds have investments in marijuana companies.

What to Do?

Most experts seem to think that you will be OK, unless you put money in a fund that specifically states it invests in marijuana stocks.

Before buying a single stock or fund, you should check it out. You probably don't want to buy an ETF named Reefers R Us. But you should be wary when buying anything.

There are several bills in Congress dealing with the growing disparity between federal and state laws regarding cannabis. There are also regulations working through the Treasury Department to do away with federal restrictions the cannabis industry faces in the financial sector.

Most experts believe that liberalization may be coming soon. But until then, current laws and restrictions on those holding a security clearance still stand.

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