Mon, Feb 23, 2015

SEC Valuation Rule Changes for Non-Listed REITs

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.

Valuation Advisory Services

Our valuation experts provide valuation services for financial reporting, tax, investment and risk management purposes.