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April 23, 2014

Financial Industry Regulatory Authority (FINRA) Provides Guidance on Communications with the Public Concerning Unlisted Real Estate Investment Programs

The Financial Industry Regulatory Authority (FINRA) has issued Regulatory Notice 13-18 (Regulatory Notice) to provide guidance to member firms on communications with the public concerning real estate investment programs that are not listed on a national securities exchange, including unlisted real estate investment trusts (REITs) and unlisted direct participation programs (DPPs) that invest in real estate. FINRA noted in the Regulatory Notice that its recent reviews of communications with the public regarding real estate programs have revealed deficiencies, such as communications that (i) contained inaccurate or misleading statements regarding the potential benefits of investing in real estate programs; (ii) emphasized the distribution paid by a real estate program while failing to adequately explain that some of the distribution constitutes return of principal; and (iii) have not provided sufficient discussions of the risks associated with investing in the products in order to balance the presentation of benefits.  The Regulatory Notice provides guidance on communications concerning real estate investment programs with respect to disclosures, use of distribution rates, claims of stability, redemption and liquidity features, prior performance, use of indices and comparisons, use of pictures of specific properties and inclusion of capitalization rates.

Regulatory Notice 13-18 is available here.

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About the Author

Janet M. Angstadt, Securities Attorney, Katten Muchin Law Firm
Partner

Janet Angstadt concentrates her practice in financial services. She counsels broker-dealers and market centers on a wide variety of legal and regulatory matters, including mergers and acquisitions involving broker-dealers; exchange, FINRA and SEC investigations; compliance issues related to registrations, sales practice, short sales, Regulation NMS, market making, and options and equities order handling; broker-dealer sponsored alternative trading systems such as dark pools and electronic communication networks; policies and procedures for trading systems development and testing; and...

312.902.5494

About the Author

Avi Badash, Katten Muchin Law firm, finance attorney
Associate

Avi Badash concentrates his practice in financial services matters.

Prior to joining the firm, Avi was an Associate Director at the Financial Industry Regulatory Authority (FINRA), where he was involved in securities arbitration matters among broker-dealers and between broker-dealers and their customers or registered representatives.

While in law school, Avi was a member of the Cardozo Securities Arbitration Clinic.

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