Steer clear of unsolicited investment offers. Solo 401k Investors should be skeptical when they receive unsolicited investment offers. The one telling you about an investment opportunity may be your trusted friend, coworker or a member of your family. Nonetheless you should ask yourself why this person is telling me about a really attractive investment option.
Since promoters often target retirement accounts such as Solo 401k plans, investors should be watchful of unsolicited investments presented by promoters that specifically solicit the use of Solo 401k plan funds.
Further, promoters often attempt to induce Solo 401k plan investors into rolling over their former employer 401k plans or IRAs into a new Solo 401k plan for the sole purpose of then investing in the promoter’s fraud scheme.
Ask questions. When a person offers investments, be sure to ask if he or she is licensed to sell investments and if the investment being offered is registered. Subsequently, confirm the information with the SEC or applicable state securities regulator.
Further, the SEC has published a guide containing questions that should be asked before proceeding in making investments purported to be registered. Here is the link to the SEC publication titled Ask Questions.
Second guess guaranteed returns. There is no such thing as a safe investment contrary to what fraud promoters often detail. Therefore, be weary of promoters who promise high returns with no risk. Every investment carries some degree of risk, and the level of risk typically correlates with the return an investor can expect to receive. Low risk generally means low yields, and high yields typically involve higher risk.
Put simply, high returns are not possible without some degree of risk.
The SEC and NASAA cited 6 cases in 2011 that involved fraud in self-directed retirement plans.