Education

CONSUMER INVESTOR AWARENESS NOTICE

Today, more than ever, it is important that owners of self-directed retirement plans conduct research to make informed decisions and avoid fraud, but where do you start?

GoldStar Trust Company is a proud member of RITA, the Retirement Industry Trust Association, an organization dedicated to help Americans reach their retirement goals. You can find more information about RITA at their homepage of www.ritaus.org.

For your convenience, listed below are several websites that have resources about investor education, scams and fraud:

The Securities and Exchange Commission (SEC) is dedicated to helping Americans protect their investments
Phone: 800.732.0330
Website: www.investor.gov
SEC Litigation Releases
SEC Administrative Proceedings

The North American Securities Administrators’ Association (NASAA) provides information on investor education
Phone: 202.737.0900
Website: www.nasaa.org
NASAA Private and Public Efforts to Educate Investors

The Financial Industry Regulatory Authority (FINRA) has an “Investor” section on Smart Investing
Phone: 301.590.6500
Website: www.finra.org
Information from DFI: Saveandinvest.org – FINRA

American Association of Retired Persons (AARP) includes a section on scams, fraud and consumer protection
Phone: 888.687.2277
Website: www.aarp.org

BE AWARE OF FALSE CLAIMS & ENDORSEMENTS

Be mindful of individuals who offer investments that are “approved by the government” or imply that because the transaction occurs through a custodian that the custodian approves the investment, that it is appropriate for you or that it carries little or no risk.

There are risks associated with any investment that is not FDIC-insured. Neither governmental agencies nor self-directed IRA custodians endorse specific investments. The fact that an investment is permitted in an IRA should not be used in determining whether the investment is appropriate for you.

 

A SAMPLE OF QUESTIONS TO CONSIDER WHEN CONTEMPLATING YOUR INVESTMENTS

  • Have you checked the investment history of the individual(s)/entity offering this investment?
  • Have you checked with the Secretary of State to ensure that this entity/company is in good standing?
  • Have you consulted with an independent financial professional to ensure that this investment is suitable for you and meets your investment objectives?
  • Have you reviewed the consumer investor awareness resources provided above?

Of course, the resources and issues identified above are not intended to be all-inclusive, but they should give you a head-start on reducing the risk of the investment decisions that you make for yourself and your self-directed retirement account.

 

**This notice is not intended to be nor should it be construed as investment advice, nor should this notice or the resources cited above be considered the ultimate authority with respect to your investment decisions. If you feel that you need specific investment advice, we encourage you to consult with an independent financial professional when considering an investment to ensure that your investment is suitable for you and fits within your investment objectives.

RITA – CHECK BEFORE YOU INVEST

Dear Investor

Check Before You Invest is an investor education awareness campaign created by the Retirement Industry Trust Association, the trade association for self-directed retirement plan providers. The purpose of this initiative is to promote investor awareness through educational materials and resources provided by state, federal, and private agencies. We recommend that you utilize this checklist and additional resources provided below while you contemplate any self-directed investment in your retirement plan.

Before you invest

  • Be sure your IRA investment is consistent with your investment goals.
  • Understand that any investment outside of an FDIC-insured product is subject to risk including loss of principal.
  • Understand that neither your IRA custodian nor any governmental agency endorses or guarantees non-FDIC insured investments.
  • Watch out for fraud red flags including but not limited to: guaranteed investment returns, high pressure sales techniques, and too good to be true statements.
  • Ask a trusted professional (such as your accountant, lawyer or financial adviser) for a second opinion.
  • Be sure to utilize information and resources from: the Securities and Exchange Commission (www.investor.gov) the National Association of State Securities Administrators (www.nasaa.org) and the Financial Industry Regulatory Authority (www.saveandinvest.org)

After you invest

  • Carefully review each account statement and follow up with questions to the investment sponsor if you do not understand it or something does not make sense or seems suspicious.
  • Remember your IRA custodian maintains your account and forwards account information to you but it is not responsible for any profits or losses on your investments.
  • Report any suspicious activity related to your investment to your “trust company”, and state or federal authorities

Investment Questions

 

The Retirement Industry Trust Association and its member firms encourage each investor to review the following questions when considering an investment. Because it is not the responsibility of passive custodians to provide investment analysis or recommendations or to perform due diligence concerning your investment decisions, the questions have been designed to help you in your efforts to evaluate the soundness, prudence and merit of your investments. Please note that this is not a comprehensive list of questions but simply a starting point. The answers to these questions are not a substitute for your own due diligence. We also strongly encourage investors to make use of Legal, Tax and Financial Advisors to support these efforts.

HOW THE INVESTMENT WAS MARKETED TO YOU

  1. Does the sponsor/advisor use unprofessional or hard sell tactics in marketing presentations or materials?
  2. Does the sponsor/advisor pressure you to make investments quickly (i.e. time is of the essence)?
  3. Was the investment marketed through newspaper, internet or other broad based advertising materials?

Always take the time you need to understand and evaluate a potential investment. In addition, while legitimate sponsors or advisors may raise funds through “free lunch” or “free dinner” events, keep in mind that such events may be used as an enticement for you to invest. Legitimate sponsors and advisors may also solicit investors from a certain affiliation group such as ethnicity, religion or age bracket (in particular seniors). Be cautious if a sponsor or advisor uses the affiliation as the reason to make the investment, rather than relying on the underlying merits of the investment or trust in the sales person.

THE INVESTMENT

  1. Does the investment contain unusually high interest rates or returns (look too good to be true)?
  2. Is the investment described as “safe” or “guaranteed”?
  3. Is the investment described as “IRA-approved”, “IRS-approved”, “custodian-approved” or “approved by any governmental agency”?
  4. Is the investment framed as having any tacit approval from a passive custodian, such as “exclusive provider for custodian X”?
  5. Does the investment claim to perform better than industry or market average for no apparent reason?
  6. Does the investment claim to use “insider information” approaches?

If you answer yes to any of these, it should raise a red flag. The adage says “if it sounds too good to be true, it probably is”. There is risk in any investment. Custodians and the IRS do not “approve” investments. Investments made on insider information may well be illegal. Check these investments thoroughly before proceeding.

BACKGROUND OF THE INVESTMENT SPONSOR/
ADVISOR AND INVESTMENT DOCUMENTATION

  1. Are you provided with biographies for the investment sponsor, principals and the advisor?
  2. Does the business experience or skills of the sponsor, principals and the advisor align with the investment strategy?
  3. Can you verify the credentials the sponsor, principal and advisor?
  4. Has the sponsor and advisor explained to how they make money?
  5. Does the advisor ask for the purchase check to be made payable to them personally rather than to the firm or investment entity?
  6. Is the investment and/or the investment sponsor in good standing with the Secretary of State in the State of its location and are all/any legal requirements for the sale of such an investment being followed?
  7. Have you had the investment documentation (Private Placement Memorandum or “PPM”, subscription documents, periodic statements, etc.) reviewed by your professional legal or tax advisors?
  8. Does the investment documentation contain information on how the investment funds will be used?
  9. Does the business plan explain how and when the investment will attempt to become profitable and the timeline in which an investor can expect a return on their investment? Does it make sense to you, or is it being sold primarily on its promised returns?
  10. Does the investment documentation contain unreasonable capital call provisions (such as if the investor doesn’t respond they lose the original investment)?
  11. Does the sales material or presentation of the investment match the nature of the offering documentation you are being asked to sign?
  12. If collateral is involved with the investment, are you able to determine that it will be properly secured for your benefit?

Make sure the Investment Sponsor or Advisor promoting the investment has provided you with information sufficient for you to do the research (due diligence) necessary to verify the existence of the investment and the credibility of the individuals involved. If they seem reluctant to provide it or to answer questions thoroughly (seem vague or evasive), that should raise a red flag.

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