Purchasing an "Outside Investment" Through IRA

[Guest JMars485]

I am a depositor in a thrift institution which has announced an IPO. I have the opportunity to order shares of stock at the IPO price. The stock will be traded on the NASDAQ beginning in early July.

I have received an "Outside Purchase Agreement" from my broker that will allow me to purchase shares for my IRA wiht funds from my IRA. The Outside Purchase Agreement indicates that I must turn over the stock certificate to the company within 30 days of their issuance of a check to purchase the shares.

Shouldn't I have 60 days to give them the stock certificate? The deadline for orders (and payments) to be received is about 2 weeks prior to the anticipated start of trading, and I'm concerned that I won't have the certificate in time to meet their deadline. Does anyone know if the 60 day "redeposit" rule also applies to the "deposit" of securities that are purchased using funds from an IRA?

Thanks for your help.

[John G]

This not really a rare transaction. I know Fidelity, Schwab, FBR, Brown, FIG, Legg Mason and other brokers have done this in the past. Over 400 thrifts have gone public in the past 30 years.

It sounds like you are either talking to the wrong folks (clerks at the front desk vs the back office IRA dpt) or they have no experience with this transaction. Call the conversion office and talk with the rep from the consulting firm that is handling the transaction. They have a lot of experience with purchases from IRA accounts.

You absolutely do NOT want to get a check cut by your custodian which you will carry or mail to the IPO office. As soon as you get the check, you are on a 60 day schedule. However, if your brokerage sends the funds directly to the thrift, they are essentially acting as a second custodian and the clock is not ticking. After the regulators approve the final mathematics, the offering can be completed. This usually takes less than 60 days, but sometimes can be held up for 90+ days.... such as if the deal gets "resolicited". After the deal is settled, the certificate is sent directly to your custodian, along with any interest or refund amount.

New thrift offerings used to be very juicy. However, in the past 2 years, as interest rates have slide, many IPOs have drifted sideways. This is especially true of any mutual holding company offerings (MHC's), where only a partial number of shares are issued.