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Due Diligence

The Good, the Bad, and the Fraudulent

With many different fraud schemes out there, it is important for Equity Trust Company clients to be aware and educated in order to protect their investments. As the owner of a self-directed IRA, our clients’ knowledge and expertise is their first line of defense against fraudulent investments.

The only investments within our clients’ accounts are the investments which they find and choose to hold. Performing due diligence for each investment opportunity is good practice. It will help weed out unsound investments and protect from fraud.

Remember: There’s a line between a good investment and a too good to be true investment.

Doing Your Homework

Due diligence is the care an investor takes before committing to an investment. Reading the customer reviews before buying a product online, visiting the college a child is interested in attending, checking out Consumer Reports while looking for a new vehicle, comparing the current prices and having a title search and inspection before buying a home are all examples of due diligence you perform before making a major investment.

The same idea holds true when seeking out investments for a self-directed IRA; we urge our clients to investigate the opportunity and make sure they have all the facts before committing to the purchase or sale.
One of the best things about having a self-directed IRA is the ability to use a lifetime of knowledge and experience to invest. The contacts and resources developed over time can help with growing your IRA. The indicators and trends you know to watch or watch out for now work towards growing your IRA. Equity Trust Company lets our clients use the common business sense they have come to trust in their professional life to avoid schemes, scams, and fraud.

Performing due diligence is also necessary when our clients choose to invest in opportunities outside of their prior experience. While one may have practical skills to help guide them through previously unchartered waters, Equity Trust Company knows our clients will need to develop new skills and questions to ask.

Salespeople promoting legitimate investments know a prospective investor will have serious questions to ask and will readily provide the information you seek. If you feel like questions aren’t welcome or respected this should raise a warning flag.

The same is true for making sure the answers you receive actually answer your questions. Are you able to verify the claims made about the patent or trademark, or the salesperson’s qualifications and licensing?

If you asked for financial documents, proof of ownership of the collateral securing the note, did you receive it without a fight or delay? What was their reaction when you told them you needed your attorney, accountant, or financial advisor to review the investment?

Be aware of the following while performing due diligence to avoid being the victim of a fraud scheme or scam:

Questions to Ask Yourself


Have you heard of this person or company before?

If not, take the time to learn more. Visit their location, research their standing with the Better Business Bureau and check to make sure they are registered to do the type of business they are offering.


Do you understand how this investment can gain or lose funds for you?

Fraud perpetrators often make the details of an investment as complex as possible. Never feel intimidated to ask questions or bring in a qualified third party to help you understand a deal.


Do you understand what you are agreeing to with this investment?

Consider having a competent attorney review the investment.


Does this type of investment exist?

Check with the International Chamber of Commerce (ICC), Securities and Exchange Commission (SEC), and other governing bodies to see if there are any fraud warnings that match what was offered to you.


Is the only information you have from this person or entity the information they provide you?

Do your own independent research. Make sure you can verify their claims and identities from other, reliable sources. Be skeptical.


Does the pattern of gains and losses look natural for this type of investment?

Again, having a qualified third party to assist you in investigating and understanding the information you find can be invaluable. PONZI SCHEMES, for example, are known for having eerily consistent returns, especially high returns, to their investors before the whole thing collapses. Equity Trust Company knows ups and downs are part of investing. Make sure the information makes sense or is it too good to be true.

Identifying Scams
man on mountain

Let’s talk about your financial future.

Schedule a one-on-one session with an expert alternative investment counselor. We’re here to answer any questions, help guide you through the process, and provide more detailed information and education specific to your journey.

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