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November 06, 2009 at 07:00 PM
The Employee Benefits Security Administration has released an advisory opinion that could affect a financial professional who serves as a broker for an individual retirement account and non-IRA accounts for the same client.
EBSA Advisory Opinion 2009-03A concerns a client who has run up debts related to the IRA.
The client has non-IRA accounts with the broker.
In the advisory opinion, an EBSA official looks at whether the IRA can grant the broker a security interest in the non-IRA accounts, to cover the debts related to the IRA, or if that transaction would result in a prohibited transaction.
“Granting such a security interest in the IRA’s assets would amount to an extension of credit by the IRA to the IRA owner, a fiduciary and a disqualified person, and cause a violation of [Section 4975(c)(1)(B) of the Internal Revenue Code],” Louis Campagna, a division chief in the EBSA Office of Regulations and Interpretations writes in the advisory opinion.
