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

Sponsored financial news

Featured video

INTV

Why some retirement plan advisers think Fidelity is invading their turf

InvestmentNews editor Frederick P. Gabriel Jr. and reporter Greg Iacurci talk about this week's cover story that looks at whether Fidelity Investments is stepping on the toes of retirement plan advisers.

Latest news & opinion

Broker protocol: Indecision over recruiting agreement is rampant

Ruckus over recruiting agreement has even wirehouse lifers wondering if it's time

SEC Chairman Jay Clayton outlines goals for a new fiduciary standard

Rule should provide clarity on role of adviser, enhanced investor protection and regulatory coordination.

Advisers bemoan LPL's technology platform change

Those in a private LinkedIn chat room were sounding off about fears the independent broker-dealer will require a move to ClientWorks before it is fully ready.

Speculation mounts on whether others will follow UBS' latest move to prevent brokers from leaving

UBS brokers must sign a 12-month non-solicit agreement if they want their 2017 bonuses.

Maryland jumps into fiduciary fray with legislation requiring brokers to act in best interests of clients

Legislation requires brokers to act in the best interests of clients.

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