Finra's REIT rule to raise transparency on prices takes effect

New reg mandates changes to customer account statements that better reflect true value of nontraded REITs

Apr 11, 2016 @ 3:39 pm

By Bruce Kelly

Independent broker-dealers on Monday began to adjust to a revised industry rule intended to give investors a clearer picture of what they are paying for investments: a change to customer account statements regarding the value of illiquid investments such as nontraded real estate investment trusts.

The Financial Industry Regulatory Authority Inc.'s new account statement rule comes as part of a new regulatory regime for the securities industry. Last week, the Department of Labor rolled out the final version of a regulation that would raise investment advice standards for retirement accounts.

According to a Finra notice from January 2015, the general industry practice in the past was to use the offering price, or par value, of a nontraded REIT as the per share estimated value during the offering period, which can last as long as seven and a half years. The offering price, typically $10 per share for a nontraded REIT, often remains constant on customer account statements during this period even though various costs and fees have reduced investors' principal and underlying assets may have decreased in value.

Under the new rules, broker-dealers will have to reflect the true value of the investment on customer account statements right away. Broker-dealers can use two methods to determine an illiquid investments estimated value: a net investment or appraised value.

Two Cole Capital REITs on Monday announced estimated per share net asset values. Cole Office & Industrial REIT announced an estimated value of $10 per share and Cole Credit Property Trust V Inc. announced an estimated per share value of $24.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Cameras roll at Best Places to Work for Financial Advisers' awards

Advisory firm winners on the top 50 InvestmentNews list of Best Places to Work for Financial Advisers explain the significance of this recognition at the Chicago awards event.

Latest news & opinion

Supreme Court decision likely to prevent brokers from filing class-action lawsuits

However, it likely won't bar employees from filing 401(k) lawsuits against their employers.

5th Circuit denies states' second attempt to defend DOL fiduciary rule

The three-judge panel split again, 2-1, in deciding not to take another look at the motion to intervene by California, New York and Oregon.

Pass-through tax strategies for business-owner clients

Shifting business structure, changing filing status and spinning off equipment are examples of ways business owners can take advantage of the deduction.

Finra anticipates oversight role for SEC advice rule

CEO Robert Cook says one area for examination could be the proposed requirement that brokers act in the best interests of their clients.

IBDs with the most CFPs

Here are the 10 independent broker-dealers that employ the most certified financial planner professionals.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print