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? Let me know.