4 Signs of a Promissory Note Scam

A promissory note is a type of debt that investors can choose to invest in. Sometimes, companies will issue notes to individual investors as a way to raise money for the company. However, before investing in a promissory note, you want to make sure that you are not dealing with a scam. Here are a few signs of a promissory note scam.

1. Contacting You

Most individuals that choose to invest in promissory notes do so after seeking them out. You can sometimes locate these notes after doing a fair amount of research and finding a company that is offering them. However, many scams involve a salesman coming to you and asking if you want to purchase a note. If you receive a phone call or someone comes to your house asking you to buy a promissory note, you are most likely dealing with a scam artist. Get their information and report them to the authorities, if possible. Anyone that is actively trying to sell you a promissory note is probably trying to take advantage of you.

2. Registration

When you are looking at a promissory note, you should make sure that it is registered with the SEC or with your state securities regulator. Most legitimate promissory notes are going to be registered with one of these two entities. Promissory note scams will obviously not be registered with either one of these. While this is not a foolproof way to separate the scams from the legitimate offers, it is a place to start. If the salesperson tells you that this promissory note is not a security, you should be very skeptical about doing business with them.

3. Licensed

Most promissory notes are considered to be securities. In order to sell securities, you must be licensed to do so. Therefore, unless you are licensed to sell securities, you should not be trying to sell promissory notes. If someone is trying to sell you a promissory note, you need to ask them if they are licensed. If they cannot provide proof that they are licensed, you need to avoid working with them.

4. Risk Free

Many con artists will try to sell you on the idea of a risk-free return. In reality, nothing is risk-free and you should keep this in mind when someone is telling you otherwise. If someone is mentioning how this promissory note is a risk-free investment with a huge potential return, the scenario is most likely too good to be true. Many times these sellers will tell you that a promissory note is guaranteed or insured in some manner. This is very unlikely and many times you will be dealing with a company that does business outside of the United States. If this is the case, you should be very skeptical about your chances of ever seeing your money again if you give it to this individual.



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