1300 W. Washington Street

Phoenix, AZ 85007-2996

 

 

Main: (602) 542-4242

Email: SecuritiesDiv@azcc.gov

General

About Small Business Investments

Small businesses may raise start-up and growth financing by selling stock or debt to the public. This type of financing often is considered public venture capital. Many investors view such an investment opportunity as a chance to get in on the ground floor of an emerging business that is on the verge of going public.

Beware! Purchasing the stock or the debt instruments of a small company is a highly speculative investment even under the best of economic climates. Statistically, most new businesses fail within the first few years of operation. Thus, it would be wise to avoid investing a large portion of your personal assets into an unknown, start-up company.

Read more about small business investments before you hand over your money. If you're an entrepreneur, read the guidelines on how to raise capital in Arizona and the statutes you need to follow before soliciting for investor funds.


Choosing and Monitoring an Investment Professional

Need help managing your nest egg? There are various types of financial professionals who can provide assistance in helping you reach your financial and retirement goals. In many instances, the assistance of an investment professional is needed to provide perspective and guidance, especially if you don't have the time or expertise to handle your own investments.

One way to narrow the search is to generate a candidate list by asking friends, family and neighbors, but then you need to interview this person to make sure you feel comfortable with their investment strategies for your financial situation. Before entrusting your life savings with anyone, it is important to know what questions to ask and how to verify the answers, which can save you time, frustration and most importantly, potential financial loss due to unsuitable investments and fraud.

What should you expect from a financial professional? No matter what type of investment professional you choose, you should receive the following services for your money:

  • A written summary of services and fees,
  • A discussion of your risk tolerance,
  • A detailed explanation of the assumptions underlying your investment plan, and
  • A range of investment choices, and the pros and cons for each.

Read more about how to choose and monitor an investment professional.


Common Investment Pitfalls and Traps

Investing your money can be a daunting task. The road to finding the right investment for you can be littered with confusion that can translate into high costs and worst yet—significant financial loss and fraud.

Be a victor and not a victim! A few simple actions can potentially help investors sidestep the financial devastation promoted by a con artist or unscrupulous investment professional. Here are some common pitfalls to avoid:

  • Commissioned salespeople posing as impartial advisers with "credentials."
  • Lack of disclosure regarding uninsured products sold at banks.
  • Poor quality of oral and printed disclosure about investment products.
  • Hidden derivatives in funds touted as "safe."
  • Account statements that do not clearly indicate performance, fees, and commissions.
  • Unauthorized investment products sold by a registered securities salesperson.
  • Sales pitches with exaggerated claims about guaranteed profitability within a short time period.

Read more about how to avoid the common investment pitfalls that may trap you.


How to Ask and Check Before You Invest

Before making any investment, make certain the person selling it to you is registered with a securities regulator or has a valid exemption. Many investors, however, neglect this important step because either they do not know where to get background information or they think that they already know the salesperson and don't think a check is necessary. As a result, some investors are surprised to find out that the person, investment opportunity, or company is not authorized to sell investments.

Securities regulators want you to make informed decisions prior to investing your hard-earned money. While the majority of the investment professionals are honest and reputable, there are those individuals and firms, like many professions, who do not have your best interests in mind. Thus, one telephone call to the Investigator on Duty at the Securities Division, 602-542-0662, or an email inquiry may save you from sending your money to an unscrupulous professional and company that has a disciplinary history with securities regulators.

Read more about how to ask and check before you invest by learning the important questions you need to ask and where to verify the answers before handing over your investment dollars.


Know Your Risk Tolerance and Suitability

Before you make any investment decision, you need to consider two factors that should influence all of your choices--your risk tolerance and what investments are suitable for you.

Risk can be simply defined as the possibility of suffering a loss. The higher the return on your investment, the greater the risk you are taking. One way to minimize your risk of financial loss is through diversification, which can be summed with the old adage, "Don't put all your eggs in one basket."

Suitability means that the investment is in line with your investment objectives and financial situation. You should buy investments that are appropriate for you at your stage in life. Also, consider how soon you need access to the money you will be investing. The sooner you need access to the money, the more liquid (easily converted to cash) the investment should be.

Read more about risk and suitability before you decide on any investment. Complete a investor risk survey then compare to the score card to determine your risk tolerance.


Raising Capital in Arizona

Unless an exemption from registration applies, you must register securities before you even offer them to anyone. "Offer" is a broad concept. Essentially, you are making an offer any time you are providing someone with information in order to generate an interest in buying. You may not intend to make a sale at the time, but by providing the information, you may be making an offer.

Certain types of securities and certain types of securities transactions are exempt from registration requirements. These exemptions typically are based on the quality of the issuer or other types of factors that offer protection to the investors so that the protection afforded through the registration process is not necessary.

For a discussion of the exemptions most commonly relied upon to raise capital in Arizona, see Raising Capital.


Tips on Reading a Prospectus

Before making any investment, ask for and review the prospectus. Many investors, however, avoid reading a prospectus before investing since it appears to be too difficult and time-consuming. As a result, some investors solely rely upon a salesperson to render a verbal summary of its contents, and are sometimes unpleasantly surprised to find out the investment they just made is not exactly what they expected.

Anyone offering you an investment opportunity should give you an offering memorandum--a complete description of the investment and the people and the risks involved with the investment. Read it. If the memorandum makes your eyes glaze over, have an accountant, a securities lawyer, or another knowledgeable and objective third party read the document.

Read more tips about what to look for when evaluating a prospectus, including the important questions to ask and where to verify the answers concerning the investment salesperson, product and company.

Stay Connected


Arizona Corporation Commission

1200 W. Washington Street

Phoenix, AZ 85007

 

Corporations Division

1300 W. Washington Street

Phoenix, AZ 85007

 

Tucson Office (Walk-ins only)

400 W. Congress Street

Tucson, AZ 85701