Who Regulates IRA Custodians?

who regulates ira custodians

When it comes to self-directed IRAs, there are a few different custodians you can use. These include trust companies approved by the IRS.

They can allow you to invest in alternative assets, such as real estate, private placement securities, and tax lien certificates. These investments tend to be illiquid and difficult to value, so you may need to verify information in your account statements independently.


If you have an IRA, it is required by law to be held by a custodian. An IRA custodian is a financial institution that is approved by the IRS to hold IRA funds and to report on them.

An IRA custodian is subject to quarterly audits and reviews by state banking regulators. This ensures that your IRA is safe from prohibited transactions and fraud.

Another important factor in selecting an IRA custodian is its investment flexibility. Some custodians allow IRA funds to be invested in a wider range of assets than most, including real estate, precious metals and other commodities, private placement securities, promissory notes, tax lien certificates, and crypto assets.

However, these investments have unique risks. For example, illiquidity and difficulty in valuing these assets can make it difficult to know how much your retirement funds are worth. As a result, it is important to verify the information provided by your IRA custodian in your account statements.


IRA custodians are responsible for the safekeeping of assets and the protection of financial information. They must meet a set of standards and procedures, such as annual audits and maintaining a high level of regulatory capital.

Asset custody can be a vital function in protecting investments, but selecting a provider who is right for you can be challenging. Investors should compare and evaluate the qualifications of each custodian, as well as their investment options, fees and charges, customer service and support, and compliance with IRS regulations.

Nonbank IRA custodians must prove to the IRS that they are able to act within accepted fiduciary principles by demonstrating business continuity, fiduciary experience, fiduciary procedures and financial responsibility. The IRS also requires them to undergo annual audits of their books and records. These reviews ensure the trust company complies with IRS guidelines and does not conduct prohibited transactions that could disqualify the IRA account. These include investments in companies owned by a disqualified person, leases or loans to a disqualified person, and stock purchases from a corporation in which a disqualified person has a controlling interest.

The Department of Labor

The Department of Labor (DOL) regulates ira custodians who have custody or control of IRA funds. The responsibilities of ira custodians are to ensure that funds are maintained in accordance with IRS rules and regulations and not disbursed from an IRA without the consent of the owner.

The DOL also has authority over the prohibited transaction rules contained in IRC Section 4975. Generally, a prohibited transaction occurs when an IRA engages in a transaction with a disqualified person and the disqualified person receives some benefit from the transaction.

Typically, the disqualified person is a plan member or beneficiary of an IRA. However, there are some less common parties that can be considered a disqualified person and these include fiduciaries such as your custodian who is responsible for overseeing your IRA.

Often times, the disqualified persons involved in an IRA transaction can be innocently involved. Whether you are a real estate broker who works on behalf of a seller to purchase a property, or a person who uses their IRA to invest in coins, it is important to understand the meaning of “disqualified person” before entering into an investment.

The Department of Treasury

Many people have the misconception that IRAs are under-regulated, but this is not true. In fact, IRA investors benefit from a comprehensive regulatory framework.

Generally, IRA investments are regulated by federal or state securities and commodities regulators, as well as bank authorities. However, IRA owners may also invest in non-traditional assets, such as real estate, private businesses and other assets that fall outside of state or federal regulation.

If you do, your IRA will be subject to unrelated business income tax (UBIT). And you must pay taxes on the value of the assets and cash in the account as of the year that the prohibited transaction occurs plus any applicable taxes, penalties and interest.

Generally, you should not deal with disqualified persons in relation to your IRA. This is because, in most cases, a prohibited transaction will result.