FINRA filed SR-FINRA-2014-006 with the SEC to amend provisions addressing per share estimated valuations for unlisted REITs. The rule post amendment (NASD Rule 2340 - Customer Account Statements) was approved by the SEC on October 10, 2014.
Salient rule changes that will affect disclosure and practice are as follows:
- FINRA proposes two methodologies under which reported values are to be presumed reliable and included on customer account statements: (1) Net Investment, and (2) Independent Valuation.
- Net Investment may be used no longer than two years plus 150 days after breaking escrow.
- Independent Valuation methodology requires that a third-party, independent valuation expert perform or provide material assistance in the valuation.
- The Independent Valuation must be accompanied by a written opinion or report by the issuer.
- This rule will go into place on April 10, 2016.
As the world’s largest premier valuation firm, Duff & Phelps has the objectivity and expertise necessary to ensure transparency. We have also completed these particular kinds of valuations for non-traded REITs and understand the process. Please contact us for further clarity or to discuss your firm’s particular needs.
