As of April 11, 2016, new rules were implemented by the Financial Industry Regulatory Authority (FINRA), which substantially modified the requirements relating to the inclusion of per share estimated values for direct participation program (DPP) and unlisted/non-traded real estate investment trusts (REITs) securities on customer account statements. Before these rules went into effect, many brokerage firms used the original offering price of DPP and REIT securities as the per share estimated value during the offering period, which could be as long as seven and a half years. The offering price typically remained constant on customer account statements during the offering period, even though various costs and fees were in effect during the time. This means the underlying assets of the DPPs and REITs could have actually decreased in value, and that investors were completely unaware of that fact. With the implementation of the new rules, brokerage firms will now be required to include in customer account statements a per share estimated value for a DPP or REIT security that ensures the actual value is reliable and accurate. The firm will also now be required to disclose that DPP and REIT securities are not listed on a securities exchange, are generally illiquid and risky, and that a customer’s share may be less than the per share estimated value provided in his account statement.
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