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FTC - Consumer Alert
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Taxpayers With IRAs:  FYI: The IRS Does Not Approve IRA Investments

Washington, D.C. Investors with Individual Retirement Arrangements (IRAs) should be on the lookout for ads and solicitations that claim that certain types of investments for IRAs are "IRS-Approved" or "IRA-Approved." The government says these ads are misleading, because the IRS does not approve investments for IRAs.

According to the Federal Trade Commission, the Securities and Exchange Commission, and the North American Securities Administrators Association, investors are getting misleading sales pitches for specific IRA investments via the telephone, the mail and the Internet. Most solicitations are variations on this theme:

"This investment has been approved for your IRA. You can use your IRA for this investment by filling out the forms in the attached information package. Our agent will take care of the rest. This has been reviewed by the government (or the IRS). This investment is so safe you can use it for your IRA. Only certain investments are approved for IRAs."

The agencies say that fraudulent promoters are trying to take advantage of consumers who may be confused about the role of the IRS when it comes to IRAs. The IRS issues letters to IRA sponsors, trustees and custodians certifying that they are complying with requirements concerning investor rights, account administration, and standards that allow contributions to be deductible. But the IRS does not:

  • review or approve investments;
  • advise people on how to invest their IRAs;
  • endorse any investments; or
  • issue statements that an investment in an IRA is protected because the IRS has approved a particular trustee or custodian.

Before you invest, check with your state securities regulator to make sure the investment and person selling it are registered. You can find the phone number for your state securities regulator in the blue pages of the phone book.

For questions or complaints about claims for IRA investment opportunities made through telephone, mail or online promotions, the Securities and Exchange Commission (1-800-SEC-0330), or the North American Securities Administrators Association (202-737-0900).
 

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
 
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1-877-FTC-HELP www.ftc.gov

For information about setting up, contributing to, and deductions for an IRA, contact 1-800-TAX-3676 and ask for the free IRS Publication 590, "Individual Retirement Arrangements (IRAs)."

August 1998