New York State
Insurance Department

NATIONWIDE SALE OF FRAUDULENT PROMISSORY NOTES DETECTED
Superintendent Advises Insurance Agents To Confirm Rrgistration Before Selling Promissory Notes

            Superintendent Neil D. Levin today issued a warning to New York consumers, concerning the sale of fraudulent promissory notes in New York State. He also advised all licensed insurance agents, insurance brokers, and insurance producer organizations to confirm prior to the sale of any promissory note that any such note is properly registered or legally exempt from registration. Confirmation can be conducted through the New York State Attorney General’s Office, Investor Protection and Securities Bureau, or by contacting the North American Securities Administrators Association ("NASAA") to confirm that the note is properly registered or legally exempt from registration.

            The Department cautioned that a licensee’s involvement with a fraudulent investment scheme may result in disciplinary action including possible revocation of any and all licenses held with the Department. Licensees are also advised to ensure that they are licensed to sell such products since promissory notes are securities and require licensing with state securities regulators for their sale.

            "The Department of Insurance is committed to protecting New York State’s residents. We ask that all licensees help us fight this newly detected fraud by confirming registration of all promissory notes prior to sale," said Levin.

            The recommendation, detailed in Circular Letter #17, was prompted in part by notification from NASAA of serious concerns relating to a nationwide sale of fraudulent promissory notes. A promissory note is a written promise committing the maker of the promise (typically an offshore corporation in these schemes) to pay the purchaser of the note a specified sum that is equivalent to the purchase price plus an interest component. Unfortunately, in the cases where fraud has occurred, the company either ceases to exist or is found to have never existed.