Many Americans, including many accredited investors, self-direct their Individual Retirement Accounts, meaning they choose what to invest in and how much. As such, self-directed IRAs are a great target market for Crowdfunding portals. 

But sometimes even too much of a good thing is too much. If IRAs and certain pension plans take 25% or more of a deal, then the complicated ERISA rules come into play. The assets of the deal itself – whether a real estate project, a tech startup, or otherwise – are deemed to be “plan assets,” with the following undesirable consequences, among others: 

  • The project sponsors will be subject to ERISA’s stringent fiduciary duties 
  • In some situations, the project sponsors must be registered investment advisors 
  • The project is subject to annual reporting, open to the public 

To make sure that doesn’t happen, portals should bake a measuring tool into their technology, flashing red as investments from IRAs and pension plans approach 25%.

Questions? Contact Mark Roderick.

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  1. Nick K July 9, 2014 at 2:22 pm Reply

    Great post! I have a question because I’m not familiar with these rules.

    If I raise equity for a real estate deal and let’s say I raise the entire 25% equity stake needed for the bank from private investors and it’s all IRA money, do these ERISA rules still come into play even if I don’t use a portal?

    I’m glad you shared this info because the ERISA rules are brand new to me.


    • crowdfundattny July 9, 2014 at 2:37 pm Reply

      Thanks for the compliment. Yes, the rule would still apply in the circumstances you describe. But if you raise 24% from IRAs and 1% elsewhere, they won’t.

      • Nick K July 9, 2014 at 2:50 pm

        Thanks for the clarification, I really appreciate it!

  2. July 10, 2014 at 10:20 am Reply

    Hey just waqnted to give you a quick heads up annd let you know a few off
    the pictures aren’t loading properly. I’m not sure wwhy but
    I think its a linnking issue. I’ve tried it in two different browsers and both show the same outcome.

    • crowdfundattny July 10, 2014 at 1:18 pm Reply

      Thanks very much. I’ll have our IT folks look into it.

    • crowdfundattny July 10, 2014 at 3:40 pm Reply

      Update: My IT people say it’s your browser. They suggested clearing cookies and updating the browser. Hope that helps.

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