The answer, of course, from a lawyer representing hundreds of victims of Ponzi schemes orchestrated through Self-Directed IRAS ("SDIRAS") is a resounding "Yes!" The current lack of regulation of SDIRAS is clearly NOT working. Although there are stories of untold wealth being made with SDIRAS, there are also more stories of fraud, theft and Ponzi schemes that are executed exclusively through the use of SDIRAS. There is something inherently wrong with an investment vehicle that is so wildly popular with fraudsters preying upon innocent investors that the SEC and others need to issue alerts about it. What about the Ponzi schemers who are targeting the elderly with the promise of guaranteed returns if they will only transfer their entire life savings to a SDIRA which can then be wired to the Ponzi schemers and never seen again? Why are we permitting these kind of financial elder abuse schemes to continue to occur unabated?
I really do not want to know how many cases of financial elder abuse are being consummated daily in this country through the use of SDIRAS. The only way to stop this ever-increasing fraud being perpetrated through SDIRAS is to make SDIRAS less attractive as an investment tool to swindle an innocent victim. It is way too easy right now for creative fraud promoters to perpetuate multi-million dollar frauds with SDIRAS.
Here are a few simple suggestions to curb SDIRA fraud:
1. Require the Custodians of SDIRAS to actually verify that the investment" is being offered by a licensed and registered financial advisor or investment broker (for you lawyers-read that "insured" investment advisors).
2. Require the Custodians of SDIRAS to actually verify "ownership" of title to the investments being held within the SDIRA (which they are supposed to do already) regardless of whether it is stocks, real estate, a business, etc. Let's have a little scrutiny on what the investor is purchasing. After the transaction is complete, what exactly will be held by the SDIRA?
3. Let's require SDIRA Custodians to actually do something for their money. Let's require Custodians to audit each SDIRA at least semi-annually and provide the SDIRA owner with a written valuation of the holdings in their SDIRA account. Sunshine is, after all, the best disinfectant!
Just these simple changes would go along way towards curbing fraud through SDIRA investment solicitations. Would love to hear your suggestions as well. You may email me at email@example.com.