This month's state order against a Texas-based investment company serves as a reminder that consumers must be careful when they invest.

Securities Commissioner Tung Chan of the state Department of Commerce and Consumer Affairs offers some simple but powerful advice: "Make sure you always really understand what you're investing in."

Chan said people sometimes become intimidated by unfamiliar terms. Or they start to feel stupid if they don't understand the investment right from the start.

Earlier this month, the state issued a preliminary cease and desist order against a Texas-based company accused of defrauding Hawai'i investors in a "prime bank" scheme that netted at least $630,000.

Chan urged consumers to watch for warning signs of potential schemes.

She said that the preliminary order against JAIC Retirement Services Inc. and its president and chief executive officer, Andrew O. Steger, alleged they solicited investors in Hawai'i by stating that they would place the money in a "top" bank.

They are accused of violating the state's securities registration and antifraud provisions. The preliminary order seeks permanent injunctions against future violations, as well as restitution and administrative penalties of $160,000 for each respondent. Those investors were promised a 37 percent to 45 percent profit in 370 days.

Chan urges potential investors to check if the company or individuals are properly registered in the state or anywhere else.

She notes that billionaire philanthropist Warren Buffett offers similar if-I-don't-get-it,I-don't-invest advice.

"If you don't get it, it's not rude to say, 'I don't get it. Please explain again,' " Chan said.

A reader has a friend preparing to invest substantial retirement savings in a financial company. The reader called the state and found only a case that settled in 1997.

But the reader didn't stop there and kept looking on the Internet for information. It paid off when this turned up: "As recently as January 2008, he had a federal court injunction against him." But that was federal so the information wasn't in the state system.

If you are investing, find someone who can do a little research for you if you don't have easy access to a computer. You can find out a lot on the Internet in terms of background information.

Chan said that's good advice. "Go and Google the person," she said.

Even if the information you find is not from a government agency, sometimes even anecdotal information about the reputation of the person or business can give you a heads up. Or encourage you to ask more questions.

She said far too many of the cases the state investigates have to do with unregistered brokers. Her office could warn consumers easily about such businesses. "One call could have saved so much pain," Chan said.

Chan admits that not every violation or even crime will turn up in one place. Even a convicted bank robber who serves time can get a record cleared. That's why checking in more than one place for background information can pay off.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com or 535-2429.