FINRA Requests Comment on Proposed Amendments to NASD Rule 2340 to Address Values of Unlisted Direct Participation Programs and Real Estate Investment Trusts

FINRA Reg. Notice 12-14

FINRA seeks comment on a revised proposal to amend NASD Rule 2340 (Customer Account Statements) to address the per share estimated values at which unlisted Direct Participation Programs (DPPs) and unlisted Real Estate Investment Trusts (REITs) are reported on customer account statements. The revised proposal reflects changes based on comments to the amendments FINRA proposed in Regulatory Notice 11-44.

Under the revised proposal, general securities members would no longer be required to provide a per share estimated value, unless and until the issuer provides an estimate based upon an appraisal of assets and liabilities in a periodic or current report filed under the Exchange Act. During the initial offering period, member firms would have the option of using a modified net offering price or designating the securities as "not priced." Additionally, the revised proposal modifies the account statement disclosures that accompany the per share estimated value. The revised proposal also includes alternative requirements for DPPs or REITs that calculate a daily net asset value (NAV). The amendments discussed in this notice would be made to NASD Rule 2340 or new FINRA Rule 2231 if that rule is approved before these amendments are made.

Comments Due: April 11, 2012

Cross References: NASD Rule 2340; FINRA Rule 2231 (proposed); FINRA Reg. Notice 11-44; NASD Notice to Members 03-73; NASD Notice to Members 01-08; Securities Act Rule 415; Lofchie's Guide to Broker-Dealer Regulation, Chapter 6: Communications.

For more information about this document, you may contact one of the following Cadwalader attorney: Steven D. Lofchie.