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Legal Insider: Avoid Investments in Marijuana Businesses and Security Clearances

This is a sponsored column by attorneys John Berry and Kimberly Berry of Berry & Berry, PLLC, an employment and labor law firm located in Northern Virginia that specializes in federal employee, security clearance, retirement and private sector employee matters.

By John V. Berry, Esq.

Holding or applying for a security clearance and maintaining significant investments in marijuana businesses can be a problem. We have been advising clients about this issue since some states began to legalize marijuana around 2010. Owning an investment in a marijuana company (e.g., stock, equity) (or working for a marijuana enterprise) is a reportable clearance activity for security clearance holders and applicants and can lead to the loss of a security clearance or problems in obtaining one. Investments in marijuana-related companies may constitute involvement in illegal drug activities under existing government guidelines.

This can potentially be the case even where the clearance holder or applicant does not directly choose their individual stocks. It also makes no difference if the state that the investment is located in has legalized marijuana businesses. The federal government’s current view is that an individual has a duty to know about their investments and to be knowledgeable about federal drug laws.

Federal Directives on Marijuana Usage and Investment

While there has not been new major guidance in the area of investment, Security Executive Agent Directive (SEAD) 4, effective June of 2017, provides the current basis for not granting or revoking a security clearance based on drug involvement, including investments in marijuana under Guideline H:

25. Conditions that could raise a security concern and may be disqualifying include:

. . .

(c) illegal possession of a controlled substance, including cultivation, processing, manufacture, purchase, sale, or distribution; or possession of drug paraphernalia;

. . . .

If an issue were to arise, an investment in marijuana businesses could feasibly fall under a number of the security concerns in Paragraph 25 (c) of SEAD 4.

Marijuana investments have been referred to as the new Tesla or other growth industry, according to the news; the urge is to invest now. However, the problem is that until the federal government changes federal drug laws or creates an exception for marijuana businesses or investment, individuals that invest or otherwise become involved in marijuana investments can put their security clearance (and career) in danger. While investments in marijuana businesses are likely less of a red flag than usage of marijuana for a clearance holder, the best advice is to avoid marijuana investments.

We have continued to see significant confusion on this issue since 2010 when a number of states started legalizing the use of marijuana. It is advisable that individuals seeking to hold or to obtain a security clearance refrain from investing in marijuana stocks until federal law or policy changes. Looking at the current standards, the biggest risk is likely knowing that you are investing directly in a marijuana business (or direct ownership), as opposed to investing in a mutual fund where a person might be unaware of such investments. The federal government will eventually change their position on marijuana, but for the moment investing in companies or stocks that are involved in the sale of marijuana could cause security clearance problems.


If an employee needs assistance with security clearance issues, please contact our office at 703-668-0070 or visit our website to schedule a consultation. Please also like us on Facebook or connect with us on Twitter.

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