Investment Promissory Note Fraud Highlighted

In recognition of International Fraud Awareness Week (November 11-17), the Iowa Insurance Division is raising investor awareness of the risks associated with investments in promissory notes.

“Scammers often target Iowans, especially our seniors, due to our ‘Iowa Nice’ nature. If an investment opportunity sounds too good to be true, it likely is,” Iowa Insurance Commissioner Doug Ommen said. “During International Fraud Awareness Week, Iowans can find information on promissory note fraud and other types of fraud at I also encourage Iowans to contact the Iowa Insurance Division at 877-955-1212 to double-check to ensure that any seller and any product is properly licensed before signing away their hard earned savings.”

A promissory note is a written promise to pay or repay a specified sum of money at a stated time in the future or upon demand. Promissory notes are a form of debt similar to a loan or an IOU. Promissory notes generally pay interest, either periodically prior to the maturity of the note or in a lump sum at maturity.

The Iowa Insurance Division reminds investors to be cautious of these red flags:

  • Unsolicited offers. An unsolicited investment offer from anyone should set off alarm bells.
  • Short-term promissory notes. Investors should be cautious about promissory notes with durations of nine months or less, as these notes generally do not require federal or state securities registration. Such short-term notes have been the source of a large amount of the fraudulent activity involving promissory notes.
  • Claims of guaranteed investment returns or risk free notes. Every investment has risks and guaranteed investment returns are often a mirage.

A promise of above-market returns. Sometimes these claims are in the double digits, other times they are just enough above market-rates to entice investors.

State securities regulators have identified promissory notes as a leading source of complaints to their agencies. In fact, the North American Securities Administrators Association (NASAA), of which the Iowa Insurance Division is a member, reported 210 investigations involving promissory notes, which led to 149 formal enforcement actions by state securities regulators last year.

Iowans can help protect themselves by:

  • Check with the Iowa Insurance Division. The Iowa Insurance Division can help Iowans ensure the investment and the seller are properly registered or licensed.
  • Research the company. Find out how it plans to generate returns to pay the principal, interest, and costs associated with promoting the investment.
  • Ask the seller how they are being paid. Are they being paid via commissions, flat fee, etc. Iowans should steer clear of hidden or exorbitant commissions.
  • Avoid high pressure sales tactics. Walk away or hang up if you feel uncomfortable.

Before making any financial decisions, Iowans are encouraged to ask questions, take the time necessary to do the proper research and contact the Iowa Insurance Division at More information on promissory notes and other scams can be found at