An investment adviser or a life insurance agent, maybe the one who sold you your policy, calls about a rare money-making opportunity. Not only does it promise a higher-than-market rate of return, he assures, but it's also risk-free. Guaranteed by a "well-established" company that's raising capital to expand its business, it's a promissory note that matures in less than a year and earns an annual interest rate from 12 to 18 percent. With one-year bank CDs barely making 5 percent right now, what's to think about?

State securities regulators on Monday issued a warning to investors about an alarming increase nationwide in fraudulent promissory note sales. More than 35 states have reported complaints or taken action in cases involving high-risk or phony promissory notes, and 20 states have created a promissory-note task force to coordinate enforcement. The North American Securities Administrators Association (NASAA) has included bogus promissory notes on its list of Top 10 Investment Scams.

"It's a great climate for crooks because you've got a lot of people who are desperate for income," explains NASAA spokesman Marc Beauchamp. "Interest rates are lower than they've been in 25 years, which is good for the economy but tough on people who need interest income. The con artists are out there promising above-market interest rates with no risk."

The victims often are elderly people lured to invest their retirement savings or cash in insurance policies, says Beauchamp. Sometimes the notes are sold by legitimate insurance agents who aren't licensed to sell securities and know nothing about the investment promoters. In fact, the notes can come from actual companies teetering on bankruptcy, but usually they're rip-off schemes.

"A lot of the victims are women in their eighties who lose their life savings," he says. "These fellows go out of their way to befriend the investor. In an Indiana case, they even got down on their knees to pray with the person to establish trust. These guys will take your money and give you some fancy kind of document with an embossed seal and official-sounding legal language -- and too often its not worth the paper it is printed on."

Last Friday, Indiana regulators announced they had filed a 78-count criminal action against three "agents," accusing them of selling $1.4 million in worthless promissory notes to 19 victims -- including a woman in her late 80s who invested $324,000, her entire retirement savings. Florida securities regulators are investigating Lifeblood Biomedical Inc., an Orlando company whose agents allegedly sold $9 million in fraudulent promissory notes to more than 200 investors nationwide.

"We've had a whole bunch of them . . . more than a dozen pending and completed cases," says Melanie Senter Lubin, securities commissioner in the Maryland state attorney general's office. "People think they're going to get back everything they invested plus some fixed rate of return -- but they don't."

Maryland regulators recently issued a cease-and-desist order against the Texas-based Hudson Bay Trading Co., which has sold more than $700,000 in unregistered "Gold Revenue Investment Bonds" promising 36 percent annual interest rate to at least 23 Maryland investors. "People not getting disclosure of properly registered notes and licensed agents don't understand the risks involved."

Beauchamp advises people to suspect any investments that have above-market rates with a maturity of less than a year. "Even if it's only 7.5 or 8.5 percent, your `b.s. detector' ought to go off," he says.

Before investing, Beauchamp recommends you confirm that the notes are properly registered, as usually is required, by contacting your state securities regulator (www.nasaa.org). And call the National Association of Securities Dealers Public Disclosure Hotline (800-289-9999) to find out if the agent is registered. "Don't be naive, don't be greedy," says Beauchamp. "Don't blindly trust somebody who is promising you something that, on its face, is too good to be true."

Consumer complaint, question or tip? E-mail details to oldenburgd@washpost.com or write Don Oldenburg, The Washington Post, 1150 15th St. NW, 20071.