Free Guide to Promissory Notes

April 12, 2001 - The U.S. securities industry and national regulators today announced a new investor education campaign and made a guide to promissory note fraud available free on the internet.

The brochure, "Promissory Notes: Promises, Problems," is available on the Web site of the Securities Industry Association at http://www.sia.com/publications/pdf/PromissoryFinal.pdf

This is to launch the campaign by the Securities and Exchange Commission; the Securities Industry Association; the North American Securities Administrators Association, which represents state securities regulators; and the National Association of Securities Dealers, the industry's self-policing group. These groups jointly published the brochure on the risks of promissory notes.

Promissory notes typically involve loans to companies made by investors in exchange for a fixed amount of periodic income. However, legitimate corporate promissory notes are not usually sold to the general public and some schemes are fraudulent, according to regulators.

Schemes often target elderly investors, falsely claim the money invested is guaranteed by insurance companies or collateral located offshore, and promise unusually high returns.

"Promissory note fraud is especially pernicious because it often targets older Americans seeking safe, fixed-rate investments as a steady source of retirement income," Laura Unger, the SEC's acting chairwoman, said in a statement. "These investors want to safeguard their life savings – and not line the pockets of scam artists."

Before making any investment, consumers are advised to determine what they are looking for and whether it fits into their portfolio, and to investigate before they invest. A higher return generally means higher risk. Consumers also should comparison-shop and look for similar or nearly as high returns with less risk whenever possible.