Promissory notes a high risk investment

21/08/02
Consumer Protection Minister John Kobelke has warned Western Australian investors they could lose their money if investing on the basis of promissory notes.
"Promissory notes offer no more guarantee of getting your money than an ordinary cheque, and consumers should not jump into any investment offers that involve them," Mr Kobelke said.
"A mezzanine financing scheme currently raising funds for property development is targeting retirees and people with superannuation money."
Promissory notes are being issued for the funds received and are the investor's only security.
A promissory note is an unconditional promise in writing made by one person to another, outlining the payment of a sum of money at a certain date. It is not a mortgage.
"Anyone approached to invest their hard earned cash in this manner should think very carefully before proceeding," Mr Kobelke said.
"Mezzanine financing allows developers to raise venture capital without exposing either their companies or their own private assets to risk in the event of failure.
"The risk to consumers' funds on a promissory note is considerable. The lender is solely reliant on the note issuer's ability to repay the money. If an issuer cannot repay the money, lenders could find themselves with the equivalent of a rubber cheque on their hands.
"Promissory notes are a high risk way of investing money so I strongly encourage anyone looking to invest in anything, to shop around for a well known reputable financial advisor who is qualified, licensed and has no conflict of interest in the advice provided. Investigate before you invest is a very good rule of thumb."
For more information contact the Department of Consumer Protection on 1300 30 40 54 or go online at http://www.docep.wa.gov.au.
Minister's office: 9222 9211