Q: I recently saw an advertisement offering investors the opportunity to purchase common stock directly from the company at market price, without paying fees or commissions. Is this a common practice? What are the pros and cons of purchasing stock in this manner? Is there a single source of information regarding stock purchase plans of this type and a list of companies that have direct sales plans?

A: There are several ways you can purchase stock directly from a company.In rare instances, companies will sell their shares to the public without the services of a broker or other intermediary.

Far more common are dividend reinvestment programs, which allow existing shareholders to automatically convert their quarterly dividend payments into additional shares at the prevailing market price. Companies sometimes supplement their reinvestment programs by allowing existing shareholders to buy additional shares directly from the company's treasury at the current market price. And in a few cases, companies offer existing shareholders a discount of as much as 5 percent off the market price when they buy directly from the company. But that incentive has gradually been phased out, in part because of speculator abuse.

Finally, some utilities allow their customers to buy stock in the company without going through a broker. (Check with your local utility company to see if this opportunity is available in your area. There is no central listing of companies making this offer.)

Perhaps the best source of information on the subject is a book titled "Directory of Companies Offering Dividend Reinvestment Plans," published by Evergreen Enterprises. In addition to detailing the various reinvestment plans, the book includes a list of companies selling their shares directly to the public. You may purchase the book for $24.95 (including postage and handling) by writing to P.O. Box 763, Laurel, MD 20707.

The benefits of buying directly from the company are the same regardless of what form the purchase takes: The investor saves an estimated 1 percent to 2 percent brokerage commission. That charge covers not only the cost of executing the trade but also the research material compiled by the staff of the brokerage house.

The potential pitfalls vary according to the type of direct purchase you make.

If you are an existing shareholder and simply want to reinvest your dividends or make an additional purchase, your risk is fairly minimal. Presumably, you are already familiar with the company and its business operation. You are not buying an unknown quantity.

But what about making an initial purchase direct from the company? That is the time to be wary.

A tiny percentage of the companies offering direct purchase opportunities are listed on the New York, American and over-the-counter stock exchanges. These exchanges have listing regulations that require member companies to regularly file financial information.

But, by and large, companies advertising direct-to-the-public stock sales are start-ups that may not be listed on any exchange, experts say. In fact, there may be precious little public information about the company except what the company itself has filed with the Securities and Exchange Commission. Certainly, you will not have any independent research from a brokerage house available to you.

Furthermore, you should ask about the resale market for those shares. Does anyone other than the company itself maintain a market in them? Will you be able to sell them when you want? Are there any buyers besides the company or its agents? Those are all points to consider before you take the plunge.

-Q: Occasionally I want to buy a U.S. Treasury note with a two- to five-year maturity. But I can't find an announcement of the auction in the paper. Perhaps I do not know where to look. When I call the local branch of the Federal Reserve Bank, I always get a busy signal.

A: Many, but not all, newspapers routinely list upcoming Treasury auctions in their weekly calendars of scheduled events. Check the financial section of your local newspaper.

Even if your paper does not offer this calendar, there are other ways to learn of the auctions. Perhaps the best way is to call the 24-hour recording that the Federal Reserve Bank offers in most major metropolitan areas. The prerecorded message gives the most up-to-date information about pending auctions of Treasury bills and notes.

Now, once you have the information, write to your nearest bank and ask for a "New Account Request" form.