Ask Questions

When considering an investment, the Utah Division of Securities recommends asking tough questions and taking detailed notes about the investment opportunity.

Why ask questions?

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.

Taking Notes

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.

Key Questions for Investors to Consider

  • Have you researched the company and its management? Are there independent sources of information?
  • Does the company, its management, or salespersons have all their necessary licenses?
  • Whose name is on all the documents?
  • What relevant experience does the company and its managers have?
  • Have you been offered some disclosure document?
  • Do I understand the business plan and how it will make money?
  • Have you been offered audited financials from the company?
  • Does the investment’s history of returns seem to be too good to be true?
  • What is the track record of paying investors interest due or returns of principal?
  • Do you understand all the risks associated with the investment?
  • Can you afford the risks associated with the investment?
  • What is the liquidity of the investment?
  • What type of security is being offered?
  • Is that security properly registered with the Utah Division of Securities or federal government?
  • Do you understand all the costs (e.g. fees, charges, commissions, penalties) associated with the offering?
  • Do you understand everyone who will receive compensation, in any form, from your investment and for what services?
  • Do you understand the terms, if any, by which your costs can increase?
  • Are your investment dollars coming from disposable savings, or some other source such as home equity, retirement accounts, or credit?
  • Why does the company need my money?
  • How does this affect your taxes?
  • Is your membership or relationship to a specific group being used, directly or indirectly, to build trust or pressure you into the investment?