Stock fraud lawyers are seeking clients that have been the victim of stock broker fraud through the use of self-directed IRAs. Self-directed IRAs are held by a custodian or trustee and allow for investment in a broader set of assets than traditional IRAs. The custodial processes associated with self-directed IRAs gives investors a sense of security and protection. However, this is often not the case. Because self-directed IRAs’ owners are able to hold unregistered securities, due diligence is often neglected by custodians. As a result, these investments are often a vehicle of stock broker fraud.
The most common IRA custodians are broker-dealers and banks. In traditional IRAs, holdings are limited to mutual funds, CDs, firm-approved stocks and bonds. However, custodians for self-directed IRAs may invest in promissory notes, tax lien certificates, real estate and private placement securities. Investments that tie up retirement funds for a time period that is too long, fail to diversify in order to reduce possible loss or contain a risk for loss that is too high are in breach of advisers’ fiduciary duty and brokers’ suitability standard. In addition, early withdrawals come with a penalty that encourages money remains tied up in them longer.
Another significant danger of self-directed IRAs, and a reason they become a target for fraud promoters, is that they often do not require the custodian or trustee of the IRA to perform audits or keep accurate records.
If you hold a self-directed IRA and have accepted unsolicited investment offers, accepted an investment that “guaranteed returns” or if you do not have access to retirement funds because of your investment’s lengthy time horizon, you may have already been a victim of stock broker fraud. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.
For more on how to avoid becoming a victim of self-directed IRA fraud, see the earlier blog entry “The Risks of Self-Directed IRAs.”