Category Archives: pension plans

IRAs AS CROWDFUNDING INVESTORS

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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