Folio and IRAs

[core]

LC's site says that Folio trading is not allowed in an IRA.  But that snippet didn't appear until some time last year as I recall, and I haven't heard a peep about this from anyone here.  I know you can't open a Folio-only IRA if you live in one of "those" states, but I'm just talking about being able to liquidate notes in a regular LC IRA account if the need arises.

Is this restriction true?  Was this always the case, or is this relatively new?  Can anyone with an IRA confirm that it absolutely won't let you sell a note?  Is anyone grandfathered in?

[edward]

I have a traditional IRA, opened in January 2013, and I buy and sell on Folio all the time. I live in a state that allows investors in both new LC and Folio notes, in case that makes a difference.

[yojoakak]

LC's site says that Folio trading is not allowed in an IRA.  But that snippet didn't appear until some time last year...

Can you post the snippet please?

[thezinfan]

I trade in my IRA account all the time on Folio.

[core]

Can you post the snippet please?

Sure.  On the About the Trading Platform page, the very first thing at the top of the page in a highlighted box appears this snippet:

Please note that at this time, Lending Club Notes purchased through a tax-advantaged individual retirement account (IRA) cannot be traded on the Trading Platform and must to be held through maturity, either 36 or 60 months depending on the Notes you choose.

edward/thezinfan-  Thanks for your info.  It appears that this message is some plot at LendingClub to dissuade people from trading.  That, or you two got in before the restriction was put in place.  When did you guys activate the Folio account attached to your IRAs?

[thezinfan]

I opened my IRA's in Feb 2012. Activated folio on those accounts immediately.

[core]

I'm glad some of you have had luck getting in.  So there is still hope.

It sure would be unfortunate to turn 59-1/2 thinking you were going to retire comfortably cruising your brand new luxury yacht around San Francisco bay, only to find out that they're going to lock your account the second you try to withdraw anything because you didn't adhere to the posted rules.

And before anyone says I'm being overly paranoid, well which is worse:  Blatantly disregarding a very clearly worded rule, or doing something like using automated tools which isn't even expressly forbidden anywhere?  As Rev can attest to, they feel perfectly justified in blocking your IP whenever they feel like it.  I don't think it's too much of a stretch for them to point to their policy in this case and say you were in violation.

This business of making up the rules depending on the phase of the moon is getting a little old.

[DanB]

I'm glad some of you have had luck getting in.  So there is still hope.

It sure would be unfortunate to turn 59-1/2 thinking you were going to retire comfortably cruising your brand new luxury yacht around San Francisco bay, only to find out that they're going to lock your account the second you try to withdraw anything because you didn't adhere to the posted rules.

And before anyone says I'm being overly paranoid, well which is worse:  Blatantly disregarding a very clearly worded rule, or doing something like using automated tools which isn't even expressly forbidden anywhere?  As Rev can attest to, they feel perfectly justified in blocking your IP whenever they feel like it.  I don't think it's too much of a stretch for them to point to their policy in this case and say you were in violation.

This business of making up the rules depending on the phase of the moon is getting a little old.

I don't think you're being overly paranoid at all.............if your comments are meant to apply only to yourself. After all you have already been flagged. I'd suspect that the rest of us might have a lot less cause for any paranoia at all.  As for Rev's experiences, I'm wondering if he would put it, exactly the way you've put it.   

[core]

I'd suspect that the rest of us might have a lot less cause for any paranoia at all.

You are quite correct.  You might have a lot less cause for any paranoia.  Do you feel lucky Dan?  Feel like gambling?  (I guess that's a silly question to be asking the Dan Man!)

As for Rev's experiences, I'm wondering if he would put it, exactly the way you've put it.

Of course he wouldn't put it exactly the way I put it.  Because I have that certain way of putting things that cannot be duplicated by most.   He would likely agree with the spirit of what I said though.  I only know this because I've had the exact same experiences -- starting way before the flagging event.

If trading isn't allowed in an IRA, but you do it anyway, Dan I can see where you would think your account would "probably" be safe.  But this is completely a guess on your part and we are really just at the mercy of whoever happens to be in charge of the decision that day.  Guess who that is?  I'll give you a hint, her name starts with 'S'.

How do you know for a fact where they're going to draw the line in each case?

[cnmor54]

I am siding with you Core

(oh no ... i took a wrong turn in sesame street land)

banks change their rules all the time.

[core]

I am siding with you Core
(oh no ... i took a wrong turn in sesame street land)

Muhahahaha... welcome to the dark side!

banks change their rules all the time.

Yes, but they do it in a straightforward manner... usually.  And they do it in writing.  If they want to start charging me a $10 ATM fee, that's fine, I'll see the charge on my statement and I'll probably change banks before I use the ATM again.  If they quietly lower the interest rate to zero, once again, no big deal as you see it eventually and can make a decision at that point.

But think about this case:  The agreement for my bank debit card has in the fine print that you are not allowed to purchase pharmaceuticals online with it.  I have done this on more than one occasion.  If they discover this 10 years down the road, what do you think is going to happen?  They lock my account for weeks and prevent me from making withdrawals?  Maybe go back and reverse all interest that I made over those 10 years?? No, worst case they cancel my debit card and cut me a check.

But no, with LC there are all these hidden gotchas that one has to worry about, and then you get to sit there and take guesses as to what's going to happen when you break some rule that you didn't even know existed. (I'm guessing most didn't know about this IRA restriction by the sounds of it.)  You're forced to think to yourself, hmm, is this one going to have no detrimental effects, or get my IP blocked, or my account locked, account permanently closed, or money withheld?  None of this is in writing where we can find it so they are free to make things up after the fact.

[thezfunk]

I didn't know about this.  I opened my Roth IRA in June/July 2013 and applied for Folio only recently and was approved maybe 2-3 weeks ago?  However, I haven't done any trading on FOLIO yet, I have just been buying new notes.  Hey, Core, if you want to arrange some sort of test, I can pick a few 'sweethearts' for you to buy off of me 

[DanB]

I'd suspect that the rest of us might have a lot less cause for any paranoia at all.

You are quite correct.  You might have a lot less cause for any paranoia.  Do you feel lucky Dan?  Feel like gambling?  (I guess that's a silly question to be asking the Dan Man!)

As for Rev's experiences, I'm wondering if he would put it, exactly the way you've put it.

Of course he wouldn't put it exactly the way I put it.  Because I have that certain way of putting things that cannot be duplicated by most.   He would likely agree with the spirit of what I said though.  I only know this because I've had the exact same experiences -- starting way before the flagging event.

If trading isn't allowed in an IRA, but you do it anyway, Dan I can see where you would think your account would "probably" be safe.  But this is completely a guess on your part and we are really just at the mercy of whoever happens to be in charge of the decision that day.  Guess who that is?  I'll give you a hint, her name starts with 'S'.

How do you know for a fact where they're going to draw the line in each case?

Perhaps you are, but I assure you that I am at the "mercy" of no one from LC.
 As for the rest of your comment, no I'm not going to help a self proclaimed white collar crook rally public opinion onto his side on this particular issue. I am unmoved by your argument. 

[faeriering]

I think we talked about this on the forum before with Sarah.  I could trade on my account (Roth IRA) on folioFN, but she couldn't get a IRA account opened because they said she was in a folio only state and wouldn't be able to trade.

Hope that helps

[Rob L]

I live in VA so I can purchase notes direct from LC. I opened my Traditional IRA rollover account in May and soon after set up to trade notes on Folio. I've bought precisely 1 (count em) notes from Folio and sold 2. No objections were raised when I setup up my account for Folio trading, nor when I bought and sold notes on Folio. Maybe I just missed it when doing my initial study of LC, but I had no idea that I was prohibited from Folio trading (a pretty big thing to miss) until I saw this thread. Stunned actually. This is a really big deal. I haven't seen anyone post that they knew about this when they signed up and did so anyway; eyes wide open so to speak. Please speak up if you are out there. Peter; you want to weigh in on this?

Wonder if this is the law or just an LC policy. There are many things that by law you can't do in an IRA brokerage account that are fine in taxable ones. I believe buying securities on margin and selling them short are two examples. Even if you don't know the rules your IRA custodian will (I thought that was a part of their job). They won't let you make trades that break the law. That implies to me that (hopefully) this is a LC policy and not the law. If so when did this policy start and why is it there?