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Tips Before Investing in Promissory Notes

Experienced Investment Attorneys Are on Your Side

As a firm with years of experience with cases of promissory notes, The Law Offices of Jonathan W. Evans & Associates has some steps you can take as an investor to protect yourself from such schemes.

Keep yourself safe by doing the following when evaluating a note:

  • Ask: If you are not already an experienced buyer who typically buys promissory notes, you ought to question why someone is trying to sell you one.
  • Watch out for pushy sales tactics: You should never be pressured to invest in anything whether the note is fraudulent or not. Avoid sellers who tell you to take immediate action.
  • Double-check: Make sure a note is registered. You can check with the SEC's EDGAR Database. You should also make sure the investment and salesperson are in compliance with your state's security laws by contacting your state securities regulators.
  • Brokerage protections: Notes purchased through a broker who is not selling them through his or her brokerage firm are being "sold away," which usually limits or bypasses investor protections offered by the firm and the firm's regulatory obligations. Pay close attention to a broker who sells outside his firm as these can be fraudulent if they are sent to you via his personal email, if the investment statements don't bear the firm's letterhead, etc.
  • Guarantees: A salesperson cannot guarantee a certain return on a note. A seller may even say that a note is insured; however, they may not mention that the insurer is not legitimate and/or they are outside of the United States and not subject to US legal jurisdiction.
  • High Returns: In general, the higher the potential return on a note, the more likely its illegitimacy. No matter what rate of return is being sold to you, consider prevailing market conditions regarding yields on fixed-income investments.
  • Salesperson Compensation: A typical commission is 5% at most for a salesperson. Thus, you should ask whoever is selling you a note how much they are receiving. Fraudulent salespeople can be receiving as much as 50 percent.
  • Issuing Company: You should also ask the company selling the note how the note will generate the money they will pay your interest with. If they intend on using most of their money on advertising and commission, they will be less likely to repay you.

You Aren't Alone

As an investor, you need to be aware of how promissory notes need to be carefully scrutinized. At The Law Offices of Jonathan W. Evans & Associates, we know how to defend our clients from promissory note fraud and can work to recover your losses from such a note. If you want to file a claim contact an experienced promissory note attorney from our firm today.

The Law Offices of Jonathan W. Evans & Associates - California Securities Fraud Attorney
Located at 12711 Ventura Boulevard, Suite #440 Studio City, CA 91604. View Map
Phone: (800) 699-1881 | Local Phone: (818) 760-9880.