TDCI Raises Awareness of Promissory Note Fraud

Fraudulent Investments Leave Consumers with Empty Promises & Bank Accounts
Friday, November 16, 2018 | 01:05pm

NASHVILLE – In recognition of International Fraud Awareness Week, the Tennessee Department of Commerce and Insurance’s (TDCI) Securities Division is raising awareness of the risks associated with investing in promissory notes.

Promissory notes are written promises to pay or repay a specified sum of money at a stated time in the future. Most businesses who sell promissory notes use these investments to raise capital, so they are often marketed to sophisticated or corporate investors. Short-term promissory notes marketed to general public investors are more likely to be fraudulent because they are often unregistered by state and federal securities administrations.

“Short-term promissory notes are enticing because they often promise a high rate of return,” said TDCI Commissioner Julie Mix McPeak. “It’s important for potential investors to remember that these investments may be empty promises that will leave them with an empty bank account. Remember: If it sounds too good to be true, it probably is.”

The National American Securities Administrators Association (NASAA) reported 210 investigations involving promissory notes in 2017. These investigations led to 149 formal enforcement actions by state securities regulators last year.

“We urge consumers to do their homework before investing,” said TDCI Assistant Commissioner and NASAA President-Elect Frank Borger-Gilligan. “Tools like FINRA’s Broker Check are designed to protect consumers, but scams can still occur. If you have been the victim of a fraudulent investment scheme, you can file a complaint with TDCI.”

TDCI urges Tennesseans to be cautious of promissory notes, especially those with durations of nine months or less. If you have questions, call 800-863-9117 before investing. More information about TDCI’s Division of Securities can be found on their website.