Protect Your Retirement Funds Against Fraud

IRA Financial Group is committed to helping our clients make safe and financial rewarding investments with their self-directed retirement accounts. While self-directed IRAs and solo 401(k) plans can be a safe way to invest retirement funds, investors should be mindful of potential fraudulent schemes when using a self-directed retirement structure.

Recently the Securities and Exchange Commission (“SEC”) issued an Investor Alert to warn investors of the potential risks of fraud associated with investing through self-directed Individual Retirement Accounts (self-directed IRAs and solo 401(k) plans). The SEC notes that there has been a recent increase in reports or complaints of fraudulent investment schemes that utilized a self-directed IRA or solo 401(k) plan as a key feature.

The IRA Financial Group or any party cannot guarantee the success of any investment and investors should undertake their own evaluation of the merits of a proposal, and should check with regulators about the background and history of an investment and its promoters before making a decision of potential fraudulent schemes when considering a self-directed retirement structure. Investors should understand that the custodians of self-directed retirement account may have limited duties to investors, and that the custodians and trustees for these accounts will generally not evaluate the quality or legitimacy of an investment and its promoters. As with every investment, investors should undertake their own evaluation of the merits of a proposal, and should check with regulators about the background and history of an investment and its promoters before making a decision.

What is fraud?

Fraud occurs when a person or business intentionally deceives another with promises of goods, services, or financial benefits that do not exist, were never intended to be provided, or were misrepresented. Typically, victims give money but never receive what they paid for.

Who are the victims of fraud?

Virtually anyone can fall prey to fraudulent crimes. Con artists do not pass over anyone due to such factors as a person's age, finances, educational level, gender, race, culture, ability, or geographic location. In fact, fraud perpetrators often target certain groups based on these factors.

Who commits fraud crimes?

According to the U.S. Government, like their victims, fraud criminals vary educationally, socially, geographically, and financially. Most con-artists make a career of their criminal activities. Some even join professional organizations to legitimize their schemes and project a respectable front.

What are some common types of fraud?

The weapon of choice for fraud criminals is not a gun or a knife. Rather, it is most often a telephone, letter, glossy publication, or brochure offering free vacations, merchandise, investment opportunities, or services. Not all frauds involve the direct selling of goods to consumers. Some frauds target institutions or businesses. Examples include:

Here is a list of resources for retirement investors seeking information on investments and investment advisers:

Tips to Avoid and Prevent Being Financially Cheated

In general, the best prevention technique is to identify and research the persons, products and companies offering their services. The more education and understanding of the product features, especially investment products, the higher the level of scrutiny can be applied. In the event of any suspicious calls, emails or personal solicitations, report it to the proper authorities.

Always take the time you need to understand and evaluate a potential investment. Make sure you understand the investment you will be making and thoroughly understand how the promoter will be able to generate the returns being promised. Also, make sure the promoter of the investment has the necessary qualifications or licenses, if applicable, to offer the investment. Be cautious if a sponsor or advisor uses the affiliation as the reason to make the investment, rather than relying on the underlying merits of the investment or trust in the sales person.

Please click here to see a list of questions that will allow you to better determine whether a potential investment involving your retirement funds may have a high likelihood of being fraudulent. It is not a comprehensive list of questions but simply a starting point. The answers to these questions are not a substitute for your own due diligence. We also strongly encourage investors to make use of legal, tax and financial advisors to support these efforts.

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