When it comes to investing, I’m a big proponent of simplicity, diversification, and keeping costs low. That’s why I park the bulk of my investible assets in S&P 500 and small-cap ETF’s. They may not offer the largest returns out there, but over the long haul, they’ve done pretty well. I don’t have the time or inclination to try and beat the market.
Some investors disagree with that approach and prefer to chase higher returns by picking individual stocks, dabbling in more exotic investments, or investing in emerging (and riskier) industries. That’s an individual choice that every investor is entitled to make. However, investors seeking to also obtain or retain a security clearance should first consider whether their investments are compatible with that proposition.
One such example is the marijuana industry. As readers are likely aware, many states have decriminalized marijuana use under state law in recent years. This has led to a flood of marijuana-related businesses and a corresponding rise in investor interest. But because marijuana remains illegal under federal law, investing in a marijuana business – whether by buying stock or a direct ownership stake in a closely-held entity – is still considered disqualifying “drug involvement” by U.S. government personnel security officials. It also may raise concerns under separate guidelines for personal and criminal conduct. This is true even if the investor is not personally using the product or involved in cultivation, transportation, or storage.
Impact of Investment Decisions
So, what’s a current investor in marijuana or marijuana-related businesses supposed to do about this problem? Do the prospects of obtaining or retaining a clearance go up in smoke simply because of an investment decision?
Fortunately, all may not be lost. While the National Adjudicative Guidelines for Security Clearances seem on the surface to take a hardline stance on the matter, clarifying guidance issued by the Director of National Intelligence in December 2021 provides that for individuals whose only involvement with marijuana is as an investor, divestment is to be considered by federal agencies as a mitigating factor.
To be clear, this doesn’t completely eliminate risk; basic rules of common sense and reasonableness still apply. I don’t, for example, recommend tempting fate by investing in the marijuana industry despite knowing full-well of the potential for problems and then assuming that all will be forgiven by divestment if and when called to account for it by security officials. Rather, I’d construe the ODNI clarifying guidance as offering potential reprieve for individuals who already have or had marijuana industry investments and have subsequently (even if recently) unloaded them. If you fall into that category of existing investors, the smart move is to divest now instead of waiting for the investment to be made an adjudicative issue.
As to investments in broad, publicly-traded mutual funds and ETF’s that may happen to have a small portion of assets invested in the marijuana industry, the ODNI guidance indicates that individuals shall be presumed to not know of the marijuana investment and thus it will not be considered relevant for adjudicative purposes.
This article is intended as general information only and should not be construed as legal advice. Although the information is believed to be accurate as of the publication date, no guarantee or warranty is offered or implied. Laws and government policies are subject to change, and the information provided herein may not provide a complete or current analysis of the topic or other pertinent considerations. Consult an attorney regarding your specific situation.
