I’m thinking about signing an important document. How can I tell if a promissory note is legal?

Question: I’m thinking about signing an important document. How can I tell if a promissory note is legal?

Response: You’ll need to start by doing some careful research into the company’s overall financial profile. (See the link below to EDGAR). If you are not already fully skilled at conducting this type of in-depth research, you should seriously consider hiring a securities law attorney. He or she can help you perform the thorough research that must be completed before giving serious thought to investing in any company.

Promissory note fraud has become rampant in recent years, despite the Securities and Exchange Commission’s efforts to protect public investors. If you’re told there’s a strong chance that you’ll realize a fixed-rate return of 15% to 20%, you’re probably being courted to invest in a fraudulent promissory note. Don’t let greed hide the obvious. Also, keep in mind that legitimate promissory notes are rarely marketed directly to the public. Their sellers know that they should seek out savvy, experienced buyers who will      have enough money to quickly research the company behind the note and then invest.

Answered by Elizabeth Smith

Additional Resources:

• Researching Public Companies: Using the Federal Government’s EDGAR Website
• Tips For Recognizing Promissory Note Fraud

Disclaimer: This site does not provide legal advice and users of this site should not interpret any of the information presented here as legal advice. The information provided merely conveys general information related to commonly asked legal questions. We are not a law firm and the employees responding to questions are not acting as your legal attorney. You should ultimately consult with a Lawyer for your case.