FINRA has proposed a rule change that would give investors a more accurate picture of the costs of buying non-traded real estate investment trusts. If approved, the new rule would eliminate broker-dealers’ practice of listing REIT share values at $10 per share. Instead, FINRA’s proposed rule change would require pricing to incorporate the various fees and commissions that would be paid. The new rule would give investors a more accurate picture of how much of their money actually was used to purchase shares. The net effect would be that reduced share values.
The non-traded REIT industry, which saw $20 billion in sales in 2013, likely would see decreased sales if investors were provided with the more accurate information about share values. Many brokerage firms, especially smaller independent firm, generate a large percentage of their revenue by selling non-traded REITs.