Description :
A description of Promissory Notes
Legal issues involved
Full Text :
How secure are promissory notes for investors- many have been misguided -what they are

From the Man’s Den | By Michael Laliberte

A promissory note is a form of debt- similar to a loan or an IOU- that a company may issue to raise money. Typically, an investor agrees to loan money to the company for a set period of time. In exchange, the company promises to pay the investor a fixed return on his or her investment, typically principal plus annual interest.
While promissory notes can be legitimate investments, those that are marketed broadly to individual investors often turn out to be scams. That’s why you should ask tough questions-and demand answers-before you consider investing in a promissory note. Be sure you understand how they work and what risks they pose. Most promissory notes are unsecured but are passed off as your security meaning, their true value isn’t worth the paper they are written on.
Investors purchase the promissory notes, enticed by the promise of a high, fixed-rate return. The promissory notes may appear all the more attractive because the seller claims that they’re “guaranteed” or even insured, demand to see the back-up information on the both of these assertions.
Those promoting the promissory notes use a portion of the money they collect from investors to pay the sellers commissions, be sure to ask what percentage of your money is going into their pockets. Demand to see letters authorizing the sellers them to promote these promissory notes to the public, most importantly their regulatory licencing permits.
Some of these promissory scams are elaborate “Ponzi” schemes in which money coming in from the sale of new notes pays the interest on older notes. Some fraudsters try to avoid repaying the investors’ principals by convincing them to “roll-over” their promissory notes upon maturity. Usually investor confidence has
been “Baited” by the payment of some of the promised interest. This is also a ploy to get the investor to entice others to invest more since happy investors will tell their friends.

Bear in mind that legitimate corporate promissory notes are not usually sold to the general public. Instead, they tend to be sold privately to sophisticated buyers who do their own “due diligence”. Are you a sophisticated buyer or investor? if not, simply do not invest in promissory notes.
Beware and be skeptical if the seller tells you that the promissory note is a security. These must be registered with either the SEC or the OSC regulators and must meet all the standards. Make sure the seller is properly licensed if indeed these promissory notes are a security. Many sellers claim they have a licence, but usually they are licenced to sell other financial products like life insurance which does not qualify them to sell securities.

Legislation called the Limitations Act, 2002, governs the limitation period that applies to civil lawsuits. It states that unless another Act provides otherwise, a lawsuit cannot be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. Claims are presumed to be discovered on the day that the loss occurred but that presumption is rebuttable. Courts will consider when the claimant actually knew about the loss or when he or she ought to have known of the loss by the exercise of due diligence.
Matthew K. Dale | Lerners LLP | Partner | phone 519.640.6323 | direct fax 519.932.3323 | This email address is being protected from spambots. You need JavaScript enabled to view it. | 85 Dufferin Ave, London - Ontario - N6A 1K3

The bottom line, promissory notes are much like a boomerang where you basically throw your money into the wind, and hope it comes back to you…

From the Man’s Den by Michael Laliberte This email address is being protected from spambots. You need JavaScript enabled to view it.