NASAA Requests Public Comment on Proposed Amendments to its REIT Guidelines

Aug 03, 2016

The North American Securities Administrators Association, Inc. (NASAA), has requested public comment on proposed amendments to its Statement of Policy Regarding Real Estate Investment Trusts (known as the REIT Guidelines.) The crux of NASAA’s proposed changes to the REIT Guidelines is the introduction of a uniform “concentration” limit applicable to an investor’s purchase of interests in a non-traded real estate investment trust (non-traded REIT or NTR).
ADISA’s legislative and regulatory committee (chaired by John Grady, DLA Piper) is closely monitoring the situation and preparing response comments along with other associations. Currently, ADISA’s L & R committee relates the highlights of the proposal:
•             An NTR program sponsor would have to establish a concentration limit for its program, which (unless otherwise approved by applicable state securities administrators), would limit an investor’s aggregate investment in the subject NTR program, as well as affiliates of that NTR and all other NTRs to 10 percent of the investor’s liquid net worth.
•             Liquid net worth would be uniformly defined as “cash, cash equivalents and readily marketable securities.”
•             The proposed concentration would NOT apply to persons who are “accredited investors”, as defined in Regulation D promulgated under the Securities Act of 1933.
•             The sponsor AND all persons engaged in selling program interests on behalf of the sponsor or NTR would be required to maintain records for a period of six years consisting of the information relied upon to determine that the purchase met the concentration standards.
•             The NTR prospectus would have to disclose that the sponsor and selling agents are responsible for making “every reasonable effort” to determine that the investor’s purchase met the concentration standard, based on information provided by the investor regarding his or her financial situation and investment objectives.
Comments on the Proposal:
NASAA will accept comments on the proposal until September 26, 2016. Comments can be submitted by email, and should be directed to Michael Piecak, Chair of NASAA’s Corporate Finance Section, and Mark Heuerman, Chair of NASAA’s Direct Participation Programs Policy Project Group (with copies to Anya Coverman and Mark Stewart.) ADISA plans to release further information regarding their comment and will provide additional encouragement and material for ADISA members on this issue. Look for further updates on this topic in the coming weeks.