State securities regulators recently warned investors participating in self-directed IRAs to brush up on third-party custodians’ duties, as fraudsters can deceive them into thinking that a third-party custodian is a trusted intermediary gatekeeper.
“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,” said William Beatty, NASAA president and Washington securities director.
NASAA’s enforcement survey reflecting data for 2013, which tracked for the first time fraud related to third-party custodians of self-directed IRAs, found that securities regulators opened 92 investigations and initiated 13 formal enforcement actions involving third-party custodians of self-directed IRAs last year.