R
DOCUMENTS REQUIRED
PRIOR TO FUNDING
(LLCs and LPs)
This packet provides a checklist of the documents required prior to investing in
an LLC or LP inside your Self-Directed IRA. Funding will be sent within 3
business days of receipt of ALL required documents.
NuView documents to be completed and submitted:
Private Placement Purchase Authorization
Private Placement Disclaimer and Indemnity Agreement
Acknowledgement Letter Signed by the LLC Manager or General Partner
Supporting documents to be submitted:
All supporting documents must be initialed on every page as read and approved
Subscription Agreement – If Applicable (Completed and Signed)
OR
Operating Agreement or Partnership Agreement including a schedule of
members indicating the IRA’s membership
Before submitting documents to NuView please ensure:
1. Your Self-Directed IRA with NuView has been established
2. Your IRA has cleared funds available to make the investment
3. All investments have been titled in the name of your IRA:
NuView IRA, Inc FBO (Client Name) IRA #
4. All places containing investors address use:
1064 Greenwood Blvd, Suite 312, Lake Mary, FL 32746
*NuView CANNOT close on any investment assigned from or titled in the name of
a disqualified party, including yourself.
All documents can be sent to NuView:
By Mail to:
NuView IRA
1064 Greenwood Blvd. Ste 312
Lake Mary, FL 32746
By Fax to:
321-275-0475
By Email to:
[email protected]
Rev. 05/12
IRA LLC/LP Purchase FAQ’s
1. Who should be listed as the investor/member of the LLC?
NuView IRA, Inc. FBO <client’s name> IRA <acct #>
2. Are there any limitations to the IRA’s ownership percentage?
NuView will administer an IRA investment into an LLC/LP regardless of the ownership
percentage. However, if the IRA ownership combined with all disqualified persons
ownership is 50% or greater we strongly recommend you seek legal counsel as these
types of investments can be quite complex and must adhere to IRS regulations in order to
maintain the tax deferred status of the IRA. NuView does not certify whether or not
investments meet the IRS requirements.
3. What is the general process for investing into an LLC/LP with my IRA?
a. Submit a Purchase Authorization along with other LLC/LP documents to NuView.
Please refer to Documents Required Prior to Funding for complete list of
necessary documents.
b. NuView will review the documents to ensure proper vesting for the IRA.
c. NuView will send funds per the instructions on the Purchase Authorization
4. What is the time frame for funding and investment into an LLC/LP?
a. 2 days from receipt of all NuView forms and supporting documents in good order
and approved by client
5. Where should the LLC/LP send dividends or earnings?
a. All checks should be made payable to:
NuView IRA, Inc FBO <client’s name> IRA
1064 Greenwood Blvd, Suite 312
Lake Mary, FL 32746
Print Form
Private Placement
Purchase Authorization
1
NuView IRA
1064 Greenwood Blvd., Suite 312
Lake Mary, FL 32746
P: (877) 259-3256 | F: (321) 275-0475
E: [email protected]
ACCOUNT INFORMATION
Name (Your name as it appears in your plan)
Mr.
2
Ms.
Mrs.
Account Number
Dr.
INVESTMENT DETAILS
Type of Entity you are investing in:*
LLC
LP
C-Corp
Entity Name
Land Trust
Other:
Address
City, State, Zip
Phone
Unit/Shares/Percentage
Price per Unit/Share
Entity Manager/Trustee
Entity Manager/Trustee Address
Total Investment
Same as Entity
Phone
*Subchapter S Corporations do not allow IRAs as investors
*Investing an IRA in a "pass through" entity may cause Unrelated Business Income Tax. For more information, consult your tax professional or review IRS
publication 598.
3
FUNDING INSTRUCTIONS Please send the funds for purchase via:
For WIRE - Please complete the info below
WIRE
CHECK
TO BE PROVIDED
For CHECK - Please complete the info below
Bank Name
Make Check Payable To
Bank Phone
ABA Routing Number
Mail Check To
Account Holder Name
Account Number
Address
For Credit To
City, State, Zip
Send Check via:
Regular Mail
Overnight Mail ($30)
Certified Check ($10 + Overnight Fee)
4
FEES
How would you like to pay for your fees? (Fees must be paid before transactions can be processed).
Account (account must have sufficient funds for investment and fees)
Card Type:
VISA
Credit Card Number:
MC
AMEX
Credit Card (complete card info below)
DISCOVER
Exp. Date:
Billing Address:
Signature:
NuView IRA
www.nuviewira.com
More Choices. More Control.
page 1 of 2
Print Form
Private Placement
Purchase Authorization
5
NuView IRA
1064 Greenwood Blvd., Suite 312
Lake Mary, FL 32746
P: (877) 259-3256 | F: (321) 275-0475
E: [email protected]
SIGNATURE AND ACKNOWLEDGEMENT
I confirm that I am directing NuView IRA, Inc., Administrator, to complete this transaction as specified above. I understand that my account is self-directed, and I
take complete responsibility for any investment I choose for my account, including the investment specified in this Purchase Authorization. I understand that neither
the Administrator nor the Custodian (First Trust Company of Onaga) sells or endorses any investment products, and that they are not affiliated in any way with any
investment provider. I understand that the roles of the Administrator and the Custodian are limited, and their responsibilities do not include investment selection for
my account. I acknowledge that neither the Administrator nor the Custodian has provided or assumed responsibility for any tax, legal or investment advice with
respect to this investment, and I agree that they will not be liable for any loss which results from my decision to purchase the investment. I understand that neither
the Administrator nor the Custodian has reviewed or will review the merits, legitimacy, appropriateness or suitability of this investment, and I certify that I have done
my own due diligence investigation prior to instructing the Administrator to make this investment for my account. I understand that neither the Administrator nor the
Custodian determines whether this investment is acceptable under the Employee Retirement Income Securities Act (ERISA), the Internal Revenue Code (IRC), or
any applicable federal, state, or local laws, including securities laws. I understand that it is my responsibility to review any investments to ensure compliance with
these requirements.
I understand that in processing this transaction the Administrator and the Custodian are only acting as my agent, and nothing will be construed as conferring
fiduciary status on either the Administrator or the Custodian. I agree that the Administrator and the Custodian will not be liable for any investment losses sustained
by me or my account as a result of this transaction. I agree to indemnify and hold harmless the Administrator and the Custodian from any and all claims, damages,
liability, actions, costs, expenses (including reasonable attorneys' fees) and any loss to my account as a result of any action taken in connection with this
investment transaction or resulting from serving as the Administrator or the Custodian for this investment, including, without limitation, claims, damages, liability,
actions and losses asserted by me.
I understand that if this Purchase Authorization and any accompanying documentation are not received as required, or, if received, are unclear in the opinion of the
Administrator, or if there is insufficient Undirected Cash in my account to fully comply with my instructions to purchase the investment and to pay all fees, the
Administrator may not process this transaction until proper documentation and/or clarification is received, and the Administrator will have no liability for loss of
income or appreciation.
I understand that my account is subject to the provisions of Internal Revenue Code (IRC) §4975, which defines certain prohibited transactions. I acknowledge that
neither the Administrator nor the Custodian has made or will make any determination as to whether this investment is prohibited under §4975 or under any other
federal, state or local law. I certify that making this investment will not constitute a prohibited transaction and that it complies with all applicable federal, state, and
local laws, regulations and requirements.
I understand that my account is subject to the provisions of IRC §§511-514 relating to Unrelated Business Taxable Income (UBTI) of tax-exempt organizations. If
this investment generates UBTI, I understand that I will be responsible for preparing or having prepared the required IRS Form 990-T tax return and any other
documents that may be required. I understand that neither the Administrator nor the Custodian makes any determination of whether or not investments in my
account generate UBTI.
I understand that the assets in my account are required by the IRS to be valued annually as of the end of each calendar year. I agree to provide the prior year end
value of this investment by no later than January 10th of each year on a form provided by the Administrator, with substantiation attached to support the value
provided.
I understand that with some types of accounts there are rules for Required Minimum Distributions (RMDs) from the account. If I am now subject to the RMD rules in
my account, or if I will become subject to those rules during the term of this investment, I represent that I have verified either that the investment will provide income
or distributions sufficient to cover each RMD, or that there are other assets in my account or in other accounts that are sufficiently liquid (including cash) from which
I will be able to withdraw my RMDs. I understand that failure to take RMDs may result in a tax penalty of 50% of the amount I should have withdrawn.
I understand that all communication regarding this transaction must be in writing and must be signed by me or by my authorized agent on my behalf, and that no
oral modification of my instructions will be valid.
I understand that neither the Administrator nor the Custodian reviews or approves the subscription agreement, operating agreement, by-laws, limited or general
partnership agreement, trust agreement or any other similar agreement regarding the purchase or operation of the entity I am instructing the Administrator to invest
in for my account via this Purchase Authorization (the “Entity”).
I understand that I am solely responsible for making sure that the Entity was not formed and will not operate in a way that does or may lead to a prohibited
transaction under IRC §4975. I understand that if the Entity becomes a “disqualified person” (as that term is defined in IRC §4975) upon funding, then any future
mandatory capital calls may be considered to be a prohibited transaction under IRC §4975. I agree to indemnify and hold harmless the Administrator and the
Custodian and their respective officers, directors, shareholders and employees against any liability associated with investing in the Entity, including funding a capital
call, and including any liability that arises because the investment is or may be a prohibited transaction under IRC §4975. I understand that I am responsible for
confirming that no “disqualified person” with respect to my account will benefit from this investment in any way which is prohibited by IRC §4975.
I represent that I have done my own due diligence on the Entity. I understand that neither the Administrator nor the Custodian makes any attempt to evaluate the
Entity or the individuals involved with the Entity. I understand that I am solely responsible for evaluating the Entity, its operations and its investment potential.
I understand that my investment in the Entity may be subject to the Plan Asset Regulations (29 C.F.R. § 2510.3-101) and Interpretive Bulletin 75-2 (29 C.F.R.
§ 2509.75-2) issued by the U.S. Department of Labor. If these regulations apply to this investment, the Entity is disregarded for purposes of the prohibited
transaction rules of IRC §4975, and officers, directors, managers and the like may become fiduciaries of my account. I represent that I understand the Plan Asset
Regulations and Interpretive Bulletin 75-2 or I have consulted with competent legal counsel regarding these regulations and their potential application to the Entity
prior to making my investment decision.
I understand that no person at the office of the Administrator or the Custodian has the authority to modify any of the foregoing provisions. I certify that I have
examined this Purchase Authorization and any accompanying documents or information, and to the best of my knowledge and belief, it is all true, correct and
complete.
Print Name:
Signature:
NuView IRA
Date:
www.nuviewira.com
More Choices. More Control.
page 2 of 2
Private Placement Disclaimer and Indemnity
Agreement
Account Owner Name: ____________________________________________
Account Number: _________________________________________________
Name of Entity for Investment: ______________________________________
Name of Administrator or Record-keeper: NuView IRA, Inc
Please complete the following information:
Within the above named entity I personally am (select one):
Manager, managing member or partner, officer, director, trustee or a person with similar
duties
Member, shareholder, partner or beneficiary (with no management duties)
None of the Above
This Disclaimer and Indemnity Agreement will confirm our mutual understanding and agreement
regarding the proposed investment by your Account in the above named entity. Your account is
referred to in this document as the “Account”, regardless of whether it is a retirement account
under Internal Revenue Code (the “IRC”) §401, §408 or §408A, a Coverdell Education Savings
Account under IRC §530, or a Health Savings Account under IRC §223. You must sign this
agreement and return it to us prior to making the investment in the entity.
1) You understand and agree that the Custodian, the Administrator and/or the Record-keeper
for your Account (including, but not limited to NuView IRA, Inc or any agent, affiliate or
designee of NuView IRA, Inc) do not approve investments or actions you personally take or
direct the Custodian, Administrator and/or Record-keeper to take on behalf of your Account.
The Custodian, Administrator and/or Record-keeper are limited in their responsibilities under
your Account, and their responsibilities do not include investment selection.
2) You understand and agree that the Custodian, the Administrator and/or the Record-keeper
for your Account (including, but not limited to NuView IRA, Inc or any agent, affiliate or
designee of NuView IRA, Inc) do not review and approve the subscription agreement,
operating agreement, by-laws, limited or general partnership agreement, or any other similar
agreement regarding the purchaser operation of the entity you want your Account to invest in.
3) You understand and agree that you are solely responsible for making sure that the entity
was not formed and will not operate in a way that does or may lead to a prohibited transaction
under IRC §4975.
4) You understand and agree that if the entity your Account is investing in becomes a
“disqualified person” (as that term is defined in IRC §4975) upon funding (this may occur, for
example, if your IRA and other disqualified persons, including you personally, own more than
50% of the entity), then any future mandatory capital calls may be considered to be a
prohibited transaction under IRC §4975.
5) By signing this Disclaimer and Indemnity Agreement, you agree to indemnify and hold
harmless the Custodian, the Administrator and/or the Record-keeper for your Account
(including, but not limited to NuView IRA, Inc or any agent, affiliate or designee of NuView IRA,
Inc), and their respective officers, directors, shareholders and employees against any liability
associated with investing in the identified entity, including funding a capital call, and including
any liability that arises because the investment is or may be a prohibited transaction under IRC
§4975.
6) You understand and agree that the Custodian, the Administrator and/or the Record-keeper
for your Account (including, but not limited to NuView IRA, Inc or any agent, affiliate or
designee of NuView IRA, Inc) have given you no tax advice regarding the possibility that your
Account may be subject to Unrelated Business Income Tax (UBIT) as a result of its investment
in the identified entity. If your Account owes UBIT on its profits from the entity, you agree to
prepare or cause to be prepared and filed a IRS Form 990T, and any similar filing required
under applicable state laws, for each year with respect to which any such form is required, and
to cause your Account to pay any UBIT that is reported in such forms. You understand and
agree that any UBIT owed must come from funds belonging to the Account. Your agreement to
indemnify and hold harmless, as set forth in paragraph 5) above, includes liability of the parties
named therein with respect to UBIT and the preparation and filing of IRS Form 990T and
similar state tax filings.
7) You agree and understand that NuView is required to report the fair market value of the
Account to the Internal Revenue Service and/or to the Plan each year. You agree to obtain a
fair market value for the Account’s investment in the entity as of December 31 each year and
report this information to NuView on a form approved by NuView no later than January 15 of
the following year. You understand and agree that NuView is entitled to rely on the valuation
provided by you for reporting purposes and shall bear no responsibility as to the accuracy of
the information provided. You understand and agree that until a different valuation is reported
to NuView, the value of the investment in the entity will be reported based on the Account’s
total investment in the entity. You understand and agree that if you fail to provide a fair market
value to NuView as required, NuView may withdraw as administrator of your account and
distribute the asset to you or to a successor custodian.
8) You represent that you understand that with some types of accounts there are rules for
required minimum distributions from the account. If you are now subject to the required
minimum distribution rules for your Account, or if you will become subject to those rules during
the term of the investment, you represent that you have verified either that the entity that your
Account is investing in provides distributions that will be sufficient to cover each required
minimum distribution, or that there are other assets in your Account, or in other accounts that
you may access for this purpose, that are sufficiently liquid (including cash) from which you will
be able to withdraw your required minimum distributions as they become required.
9) You represent that you have done your own due diligence on the entity you want your
Account to invest in.
10) You understand and agree that the Custodian, the Administrator and/or the Record-keeper
for your Account (including, but not limited to NuView IRA, Inc or any agent, affiliate or
designee of NuView IRA, Inc) do not make any attempt to evaluate the entity you want your
Account to invest in. For example, they make no attempt to check the financial strength of the
entity, nor do they check with the Secretary of State to see if the entity is in good standing, nor
do they check with the Securities and Exchange Commission, the Better Business Bureau or
any other governmental or non-governmental agency to see if any complaints have been filed
against the entity. You, as the owner of the Account, are 100% responsible for evaluating the
entity, its operations and the investment potential of the entity, including taking the steps
described in the preceding sentence.
11) You understand and agree that you are also responsible for confirming that none of the
“disqualified persons” with respect to your Account (including NuView IRA, Inc, its affiliates and
designees, and every other entity that is the Custodian, Administrator and/or Record-keeper
with respect to your Account, their officers, directors, shareholders or employees) are
associated in any way with the entity you want your Account to invest in.
12) You understand and agree that the Custodian, the Administrator and/or the Record-keeper
for your Account (including, but not limited to NuView IRA, Inc or any agent, affiliate or
designee of NuView IRA, Inc), and their officers, directors, shareholders or employees have
not given you any investment, legal or tax advice pertaining to this investment.
13) You understand and agree that if the Plan Asset Regulations issued by the U.S.
Department of Labor apply, the entity is disregarded for purposes of the prohibited transaction
rules of IRC §4975. In that case, the underlying assets of the entity are considered to be the
assets in which your Account is investing, and each of the statements above regarding the
entity must be true with regard to each of the assets that the entity invests in. You represent
that you either understand the Plan Asset Regulations and Interpretive Bulletin 75-2 or that you
have sought competent legal counsel regarding the Plan Asset Regulations and Interpretive
Bulletin 75-2 and their potential application to the entity that you want your Account to invest in,
prior to making your investment decision.
To signify your agreement with all of the above paragraphs, please sign below and return it to us
by fax or email, with the original being followed up by mail.
PLEASE SIGN AND MAIL THIS FORM TO YOUR NUVIEW OFFICE.
Accepted, Understood and Agreed to:
_____________________________________________________________
(Client’s Signature)
(Date)
LLC & LP
Acknowledgement
Letter
BD
LLC’s or LP’s Address
_________________________
_________________________
_________________________
RE: __________________________
(IRA holder’s name)
NuView IRA, Inc. has received instructions from the above referenced IRA holder
concerning an investment in __________________________________
(Name of LLC or LP)
As this asset is to be held within an Individual Retirement Account, the following
instructions must be followed to ensure compliance with both IRS requirements and
NuView IRA, Inc. policy. Please initial all items in the spaces provided showing your
intent to comply.
_____________ Registration is to be:
NuView IRA, Inc. FBO ______________ IRA#_________
1064 Greenwood Blvd Suite 312
(Client)
Lake Mary, FL 32746
(Account #)
Taxpayer Identification Number: 27-0063496
______________
Certificates and/or proof of ownership (showing proper vesting) are
to be held by NuView IRA, Inc.
______________
All payments, income, distributions, and/or payoffs for this holding
must be sent to NuView IRA, Inc. Under the Internal Revenue code, it
is never acceptable to send funds directly to an IRA holder (or and
IRA holder’s nominee). Should that happen, you agree to indemnify
NuView IRA, Inc. against any and all liability concerning IRS
compliance.
______________ If an IRA holder has any questions concerning the IRA (such as, but
not limited to, payments, distributions, or fees), you agree to inform
the IRA holder to contact NuView IRA, Inc. directly. Under no
circumstances will third party inquiries be answered.
______________ You agree to provide NuView IRA, Inc. with a fair market value (as
defined in IRS Publication 590) by January 15th of each year.
______________ You agree to honor all written instructions from NuView IRA, Inc.
concerning changes in asset registration.
______________ You understand and agree that there may be no mandatory capital
calls concerning this investment and that the IRA holder’s risk is
limited to the actual investment.
______________ You agree to make potential investors aware that investments in
Limited Partnerships or Limited Liability Companies may generate
Unrelated Business Taxable Income, which is the responsibility of the
IRA holder.
______________
You agree, as part of your Investor Suitability Process to disclose to
the IRA holder that he/she may be subject to Required Minimum
Distributions that may require certain liquidity within their IRA(s).
______________ You agree to inform the IRA holder that you have referred NuView
IRA, Inc. as an accommodation and that NuView IRA, Inc. neither
endorses your product, nor has received consideration.
______________ You agree to provide potential investors with Subscription
Documents (or alternately, with Private Placement Memorandums or
any offering documents, as may be applicable). The Subscription
Document must be signed off as “Read and Approved” by the IRA
holder prior to receipt by NuView IRA, Inc. Until NuView IRA, Inc.
receives and reviews such documents, no decision will be made
concerning whether an NuView IRA, Inc. account holder may hold
such an investment based on our understanding of Internal Revenue
Code Section 4975.
______________
You agree to inform NuView IRA, Inc. promptly of any change in
address, telephone number, or company status (such as bankruptcy
filings, regulatory agency investigations or litigation.)
________________________________
Name of Investment
________________________________
Printed Name of General Partner, Managing Member or Authorized Representative
___________________________________
Signature
________________________
Date
Investor Alert: Self-Directed IRAs and the Risk of Fraud
The SEC’s Office of Investor Education and Advocacy
(OIEA) and the North American Securities Administrators Association (NASAA) are issuing this Investor
Alert to warn investors of the potential risks associated with investing through self-directed Individual
Retirement Accounts (self-directed IRAs). NASAA
has noted a recent increase in reports or complaints of
fraudulent investment schemes that utilized a self-directed IRA as a key feature. State securities regulators
have investigated numerous cases where a self-directed
IRA was used in an attempt to lend credibility to a
fraudulent scheme. Similarly, the SEC has brought
numerous cases in which promoters of fraudulent
schemes steered investors to self-directed IRAs. While
self-directed IRAs can be a safe way to invest retirement funds, investors should be mindful of potential
fraudulent schemes when considering a self-directed
IRA. Investors should understand that the custodians
and trustees of self-directed IRAs 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.
Investor Assistance (800) 732-0330
I. Investing through Self-Directed IRAs
An Individual Retirement Account (IRA) is a form
of retirement account that provides investors with
certain tax benefits for retirement savings. Some
common examples of IRAs used by investors include
the traditional IRA, Roth IRA, Simplified Employee
Pension (SEP) IRA, and Savings Incentive Match Plan
for Employees (SIMPLE) IRA. All IRA accounts are
held for investors by custodians or trustees. These may
include banks, trust companies, or any other entity approved by the Internal Revenue Service (IRS) to act
as a trustee or custodian.
A self-directed IRA is an IRA held by a trustee or
custodian that permits investment in a broader set of
assets than is permitted by most IRA custodians. Most
IRA custodians are banks and broker-dealers that
limit the holdings in IRA accounts to firm-approved
stocks, bonds, mutual funds and CDs. Custodians and
trustees for self-directed IRAs, however, may allow
investors to invest retirement funds in other types of
assets such as real estate, promissory notes, tax lien
certificates, and private placement securities. While
self-directed IRAs may offer investors access to an
array of private investment opportunities that are not
available through other IRA providers, investments in
these kinds of assets may have unique risks that investors should consider. Those risks can include a lack of
disclosure and liquidity -- as well as the risk of fraud.
www.investor.gov
1
II. Self-Directed IRAs and the Risk of
Fraud
According to a 2011 report by the Investment Company Institute, U.S. investors held approximately $4.7
trillion in IRAs. Estimates from various sources approximate that investors’ hold 2 percent, or $94 billion, of IRA retirement funds in self-directed IRAs.
The large amount of money held in self-directed
IRAs makes them attractive targets for fraud promoters. Fraud promoters also may target other types of
retirement accounts by attempting to lure investors
into transferring money from those accounts to new
self-directed IRAs in order to participate in the fraud
promoter’s scheme.
In particular, fraud promoters who want to engage in
Ponzi schemes or other fraudulent conduct may exploit self-directed IRAs because they permit investors
to hold unregistered securities and the custodians or
trustees of these accounts likely have not investigated
the securities or the background of the promoter.
There are a number of ways that fraud promoters may
use these weaknesses and misperceptions to perpetrate
a fraud on unsuspecting investors. For example:
.
· Misrepresentations Regarding Custodial
Responsibilities – Fraud promoters can
misrepresent the responsibilities of self-directed IRA custodians to deceive investors into
believing that their investments are legitimate
or protected against losses. Fraud promoters
often explicitly state or suggest that self-directed IRA custodians investigate and validate
any investment in a self-directed IRA. Selfdirected IRA custodians are responsible only
for holding and administering the assets in a
self-directed IRA. Self-directed IRA custodians generally do not evaluate the quality or
legitimacy of any investment in the self-directed IRA or its promoters. Furthermore, most
custodial agreements between a self-directed
IRA custodian and an investor explicitly state
that the self-directed IRA custodian has no
responsibility for investment performance.
Investor Assistance (800) 732-0330
.
· Exploitation of Tax-Deferred Account Characteristics – Self-directed IRAs are tax-deferred retirement accounts that carry a financial
penalty for prematurely withdrawing money
before a certain age. This financial penalty
may induce self-directed IRA investors to keep
funds in a fraudulent scheme longer than those
investors who invest through other means.
Also, the prospect of an early withdrawal penalty could encourage an investor to become
passive with a lesser degree of oversight than
a managed account might receive, allowing a
fraud promoter to perpetrate his fraud longer.
.
· Lack of Information for Alternative Investments – Self-directed IRAs usually allow
investors to hold alternative investments such as
real estate, mortgages, tax liens, precious metals,
and private placement securities. Unlike publicly-traded securities, financial and other information necessary to make a prudent investment
decision may not be as readily available for
these alternative investments. Even when financial information for these alternative investments is available, it may not be audited. Furthermore, self-directed IRA custodians usually
do not investigate the accuracy of this financial
information. This lack of available information
for alternative investments makes them a popular tool for fraud promoters’ schemes.
III. Ways to Avoid Fraud with Self-Directed IRAs
Verify information in self-directed IRA account
statements. Alternative investments may be illiquid and difficult to value. As a result, self-directed
IRA custodians often list the value of the investment
as the original purchase price, the original purchase
price plus returns reported by the promoter, or a price
provided by the promoter. Investors should be aware that
none of these valuations necessarily reflect the price at which
the investment could be sold, if at all.
www.investor.gov
2
Avoid unsolicited investment offers. Investors
should be very careful when they receive an unsolicited investment offer. Whether from a total stranger
or from a friend, trusted co-worker, or even family member, investors should ask themselves, “Why
would anyone tell me about a really great investment
opportunity?” Investors also should be especially wary of
an unsolicited investment offer that promotes the use of a
self-directed IRA. As noted above, fraud promoters may
attempt to lure investors into transferring money from
traditional IRAs and other retirement accounts into
new self-directed IRAs in order to participate in the
fraud promoter’s scheme.
Ask questions. Always ask if the person offering the
investment is licensed and if the investment is registered, then check out the answers with an unbiased
source, such as the SEC or your state securities regulator. The SEC has a short publication called “Ask
Questions” that discusses many of the other questions
investors should ask of anyone who wants them to
make an investment. Please take a look at it before
making any investment decision.
IV. Recent Cases Involving Self-Directed IRAs
Some recent examples of SEC and state enforcement
cases that involve funds from self-directed IRAs invested in fraudulent schemes include:
SEC v. United American Ventures
The SEC filed charges alleging that two companies
and four individuals misrepresented and concealed
numerous material facts in connection with the offer
and sale of $10 million in bonds to approximately 100
individual investors in various states. In particular, the
SEC alleged that the defendants promised guaranteed
returns in purported investments in medical technologies and raised money by convincing investors to
invest through self-directed IRAs and steering them to
custodians who offered the self-directed IRAs. Approximately $3.5 million of the funds invested in the
bonds came from self-directed IRAs.
SEC v. Stinson
Be mindful of “guaranteed” returns. Every
investment carries some degree of risk, and the level
of risk typically correlates with the return an investor can expect to receive. Low risk generally means
low yields, and high yields typically involve higher
risk. Fraud promoters often spend a lot of time trying
to convince investors that extremely high returns are
“guaranteed” or “can’t miss.” Don’t believe it. High
returns represent potential rewards for investors who
are willing and financially able to take big risks.
The SEC filed charges alleging that an individual
perpetrated an offering fraud and Ponzi scheme in
which at least $16 million was raised from more than
140 investors. In particular, the SEC alleged that the
defendant promised “safe and risk free” returns in
purported investments in real estate and commercial
mortgage loans. The defendant raised money by targeting, among others, investors in self-directed IRAs.
Approximately $9.2 million of the funds invested in
the fraudulent scheme came from self-directed IRAs.
Ask a professional. For complex investment opportunities, particularly those which involve the opening or creation of a new account outside a traditional
financial institution or well-recognized broker, investors should consider getting a second opinion from a
licensed unbiased investment professional or an
attorney.
SEC v. Durmaz
Investor Assistance (800) 732-0330
The SEC filed charges alleging that a company and its
partners perpetrated a Ponzi scheme in which at least
$20 million was raised from more than 120 investors. In particular, the SEC alleged that the defendants
promised safe, guaranteed returns in purported investments in foreign bonds and raised money by convincing investors to invest in self-directed IRAs and steering them to custodians who offered the self-directed
IRAs. $20 million of the funds invested in the fraudulent scheme came from self-directed IRAs.
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State v. Smith (24C02-1102-FB-00044) and State
v. Snelling (24C02-1102-FB-00046) (Indiana)
T�e Indiana state securities regulators pursued an ac�
tion alleging t�at Jerry Smit� and Jasen Snelling bilked
investors out of more t�an $4.5 million in a nearly
decade�long Ponzi sc�eme ��ere Mr. Smit� and Mr.
Snelling told investors t�ey �ere talented day trad�
ers and promised up to 20% returns. Mr. Smit� and
Mr. Snelling, t�roug� various companies, encouraged
investors to roll over t�eir traditional IRA accounts
into self�directed IRAs at a trust company. Mr. Smit�
and Mr. Snelling �ould immediately take t�e funds
from t�ose accounts and use t�em for personal living
expenses, but investors continued to receive statements
from t�e trust company, as �ell as bills for custodial
fees, even after t�eir money �as taken out of t�e ac�
counts. Mr. Smit� and Mr. Snelling are c�arged �it�
more t�an fifty counts of violations of t�e Indiana
Uniform Securities Act.
In re: Stephen Edward Gwin, et al. (Missouri)
T�e Missouri Securities Division issued final orders
against Step�en G�in in t�o separate cases ��ere Mr.
G�in, a federal felon, and ot�ers misled senior citizens
into investing in unregistered securities, and divert�
ing investment proceeds t�roug� self�directed IRAs
at trust companies into accounts t�at Mr. G�in con�
trolled. Mr. G�in promoted �is million dollar scam
t�roug� free lunc� investment seminars. Mr. G�in
and �is co�respondents �ere found liable and ordered
to pay various civil penalties.
deceptive sales of securities in real estate investment
programs. Mr. Warr claimed t�at investors �ould re��
ceive a guaranteed 8% annual return and t�at t�e real
estate investments �ere a safe and lucrative alternative
to more traditional investments suc� as certificates of
deposit and stocks. Mr. Warr and �is entities raised
at least $970,000 from 30 investors. A Texas court
granted t�e Texas State Securities Board request to
freeze Mr. Warr’s assets and appoint a receiver to take
control of Warr Investment Group LLC and its related
entities.
V. Recourse for Fraud Victims
If you �ave lost money in a fraudulent investment or
sc�eme involving a self�directed IRA or a t�ird�party
custodian or trustee, or �ave information about one of
t�ese scams, you s�ould contact:
•
T�e SEC Complaint Center.
•
Your state’s securities administrator. You can
find links and addresses for your state regula�
tor by visiting t�e Nort� American Securities
Administrators Association’s �ebsite.
You also can c�eck t�e SEC’s Investor Claims
Funds �ebpage for information concerning t�e ap�
pointment of a receiver or claims administrator in any
SEC enforcement action.
Texas v. Warr Investment Group, LLC, et al.
(Texas)
T�e Texas State Securities Board �as filed a petition al�
leging t�at James Elton Warr t�roug� Warr Investment
Group LLC and ot�er entities encouraged investors
to transfer t�eir funds to a self�directed IRA t�at �as
not independent, but instead �as secretly controlled
by �is daug�ter. According to t�e petition t�e Warr
entities defrauded t�e public t�roug� t�eir illegal and
Investor Assistance (800) 732-0330
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Additional Information
For additional educational information for investors, see the SEC’s Office of Investor Education
and Advocacy’s homepage, the SEC’s Investor.gov
website or NASAA’s investor education webpage.
For additional information related to avoiding
fraud, also see:
.
.
Questions You Should Ask About Your
Investments
· How to Avoid Fraud
·
For additional information regarding IRAs, please
see the Internal Revenue Service’s IRA Online
Resource Guide.
The Office of Investor Education and Advocacy has
provided this information as a service to investors.
It is neither a legal interpretation nor a statement of
SEC policy. If you have questions concerning the
meaning or application of a particular law or rule,
please consult with an attorney who specializes in
securities law.
Investor Assistance (800) 732-0330
September 2011
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