The Arizona Corporation Commission has a message for investors around the state.
The Commission warns of the potential risks of investing through self-directed Individual Retirement Accounts, commonly known as self-directed IRAs.
The ACC said custodians of self-directed IRAs generally won't evaluate the quality or legitimacy of an investment and its promoters. The Commission has found assets in these accounts being lost through investment schemes.
The ACC warns of these risks from the promoter:
- Misrepresent that self-directed IRA custodians investigate and validate any investment in the IRA
- Exploit the investor's fear of incurring a penalty and taxes due for early withdrawal of IRA assets thereby ensuring the scam continues without interruption
- Take advantage of the investor's infrequent oversight since investments are typically held for the long-term
- Capitalize on the lack of public information and absence of audited financial requirements typical of alternative investments.
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