The North American Securities Administrators Association (NASAA), along with the SEC Office of Investor Education and Advocacy, and the Financial Industry Regulatory Authority (FINRA), have published an Investor Alert cautioning individuals on Self Directed Individual Retirement Account (IRAs) that enable investors to select assets that may be riskier.
NASAA specifically mentions crypto assets (digital assets), real estate, private securities, and commodities.
NASAA states that by investing via a self-directed IRA increases the risk of fraud beyond heightened risk. The caution draws a contrast to traditional IRAs.
The warning notes that a self-directed IRA gives sole responsibility to the investor stating these types of IRAs:
- DO NOT sell investment products or provide investment advice;
- DO NOT evaluate the quality or legitimacy of any investment in the self-directed IRA or its promoters; and
- DO NOT verify the accuracy of any financial information that is provided for an investment in the account.
Speaking specifically on digital assets, NASAA says:
“Some self-directed IRAs may offer investments in “crypto assets” such as “virtual currencies,” “coins,” and “tokens.” Crypto assets may be securities that are offered without SEC registration or a valid exemption from registration, and may not be accompanied by complete or accurate information to aid investors in making informed decisions. In addition, many of the trading platforms for these crypto-assets refer to themselves as “exchanges,” which may give investors the misimpression that they have registered with the SEC.”
In regards to fraud in general, NASAA states that fraudsters may use a “fake self-directed custodian to attempt to steal your money. Before depositing any money with a self-directed IRA custodian, make sure that the self-directed IRA custodian is legitimate.”
NASAA suggests investors consult a professional when making their decisions and to be wary of any product that claims “guaranteed returns.”
NASAA is the association that represents state and provincial securities regulators in North America.