Notice of Request for Public Comment Regarding a Proposed Amendment to the NASAA Statement of Policy Regarding Real Estate Investment Trusts

The North American Securities Administrators Association (NASAA) is requesting public comment on proposed amendments to the NASAA Statement of Policy Regarding Real Estate Investment Trusts (REIT Guidelines). Comments are due on or before September 12, 2016.

The proposal would add a uniform concentration limit of 10 percent of an individual’s liquid net worth, applicable to their aggregate investment in a REIT, its affiliates, and other non-traded REITs, as defined therein. Liquid net worth consists of cash, cash equivalents, and readily marketable securities. The proposal also includes a carve-out for Accredited Investors under the income and net worth standards set forth in Regulation D, Rule 501.

The proposal also includes a recordkeeping requirement for the Sponsor or any person selling shares on behalf of the Sponsor or REIT. Such individuals must maintain records of the information obtained from Shareholders to ensure compliance with the concentration limit for a period of at least six years. Further, the Sponsor must disclose in the Prospectus the responsibility of the Sponsor and any person selling shares on behalf of the Sponsor or REIT to make every reasonable effort to ensure compliance with the concentration limit based on the information the Shareholder provides.

The proposal includes additional Administrator discretion in its application, including by providing for application of the concentration limit “Unless the Administrator determines that the risks associated with the REIT would require a lower or higher standard.” Finally, the proposal distinguishes a suitability analysis from concentration limit compliance, by providing that adhering to the concentration limit does not satisfy the independently required suitability determination under the Guidelines, existing administrative rules, or the rules of a self-regulatory organization. The proposal requires the Prospectus to include language clarifying this distinction.

Note: After the comment period has closed, NASAA will post to its website the comments it receives as submitted by the authors. Parties should therefore only submit information that they wish to make publicly available. Further, the following notice will appear on NASAA’s website where comments are posted: NASAA, its agents, and employees accept no responsibility for the content of the comments posted on this Web page. The views, expressions, and opinions expressed in the comments are solely those of the author(s).

 

 

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NASAA Proposals, Regulatory Activity, Request for Comment