The Financial Industry Regulatory Authority filed on Monday a proposal to provide more transparency in the estimated per-share value of unlisted direct participation programs and real estate investment trusts.

FINRA’s proposal, filed with the Securities and Exchange Commission, would eliminate the broker-dealer practice of listing the value of nontraded REITs at $10 per share. The rule change would require BDs to factor in fees and commissions paid to them when determining the estimated share value, which would mean lower share prices.  

FINRA proposes two methodologies under which an estimated share value would be presumed reliable: net investment and independent valuation.

The Investment Program Association, which represents nonlisted direct investment vehicles, said in a statement that it “worked tirelessly” with FINRA to revise the existing customer account statement rule “to enhance transparency and provide investors with a clearer picture of nonlisted REITs and Direct Participation Programs as they evolve.”

Presenting valuations on account statements “during the initial offering period which reflect a deduction of commissions and direct marketing fees from gross offering price represents a significant step forward in the evolution of these increasingly popular products, and the IPA supports this part of the proposal.”

However, IPA notes that its initial review of the proposal “raises a number of significant concerns,” and because of the “complexity of the rule, its importance for investors, and its potential economic impact on financial advisors, broker-dealers, and the various American industries which rely upon these investments to provide capital for their growth,” IPA believes the SEC should set the comment period at 90 days.

“The IPA believes that the significant economic impact of this proposed rule needs to be studied,” says Kevin Hogan, IPA’s president and CEO.

Check out Enforcement Roundup: Investors Win $900,000 in FINRA Arb Over Nontraded REITs on ThinkAdvisor.