From the Desk of Jim Eccleston at Eccleston Law Offices:
FINRA has proposed rule changes that would disclose a more accurate cost of shares of a non-traded real estate investment trust (REIT).
The new rule change would consider the various fees and commissions paid to brokers and dealer managers, reducing the share price reflected on customer account statements.The proposed rule has two methodologies that broker-dealers can use when an estimated value is presumed reliable: net investment and independent valuation.
With net investment valuation, non-traded REITs now do not have to show an estimated per-share valuation until 18 months after the sponsors stop raising funds, which in many cases can take two or three years. The FINRA proposal drastically speeds up the process by which investors would see a more accurate valuation (e.g. less than $10 per share).
The alternative method is independent valuation. This could be used at any time. It would consist of the most recent valuation disclosed in the issuer’s periodic or current reports and would require a third-party valuation determination.
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