Questions to Ask

Asking questions should be an integral part of an investor's decision-making process. The same way a car buyer kicks the tires when considering an automobile, an investor should ask questions about the company, its business, its management, the risks, the returns, and the financials. The Division sees many investors rely on their relationship, or affinity, with the person selling the investment rather than information about the investment. Other investors allow the salesperson to sidestep questions or accept vague answers to their questions. Informed decisions must be based on information. If the salesperson avoids questions or cannot give reasonable answers, investors should be wary of the opportunity presented.

In addition to asking questions, investors should take notes at all stages of their investment. From the initial introduction, through the sales pitch, to the signing of contracts, and also during the life of the investment, an investor should keep notes of every event relating to their investment—especially if it is a private offering. Often times if an investment goes bad, investors struggle to recreate the history of their investment or remember exactly what was promised, guaranteed, implied, or suggested to them. Taking notes helps track the investment and document wrongdoing if it occurs.