As recently reported by InvestmentNews, The Securities and Exchange Commission (“SEC”) and the North American Securities Administrators Association, Inc. (“NASAA”) jointly issued an investor alert warning about risks associated with self-directed IRAs. These IRAs differ from traditional IRAs in that they allow owners to invest their retirement savings in a number of unusual and sometimes risky investment vehicles, including real estate, life settlements, limited partnerships and private placements.
As opposed to investments in traditional IRAs that are generally limited to stocks, bonds and mutual funds, the concern is that financial scammers and unscrupulous brokers exploit those self-directed IRAs because the owners are allowed to hold unregistered securities in the accounts. Additionally, the custodians of the accounts often fail to perform the adequate due diligence on the offerings.
A recent example of the problems with self-directed IRAs is exemplified by the collapse of certain private placements or Regulation D offerings such as Medical Capital and Provident Roylaties, LLC that were held in large amounts in self-directed IRAs. According to Pratt H. Davis an attorney at the securities arbitration and litigation law firm, Page Perry, “many seniors across the nation saw their retirement savings evaporate as a result of the collapse of the private placements held in their IRAs.” According to Mr. Davis “one of the issues that arise with self-directed IRAs is that small broker-dealer firms are increasingly recommending private placements being purchased in these accounts as the commissions for the broker-dealer are significantly higher with these products.”
Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. Page Perry’s attorneys are actively involved in representing investors in alternative investment and other securities cases. For further information, please contact us.