The Financial Industry Regulatory Authority (FINRA) has issued Regulatory Notice 13-18 (Regulatory Notice) to provide guidance to member firms on communications with the public concerning real estate investment programs that are not listed on a national securities exchange, including unlisted real estate investment trusts (REITs) and unlisted direct participation programs (DPPs) that invest in real estate. FINRA noted in the Regulatory Notice that its recent reviews of communications with the public regarding real estate programs have revealed deficiencies, such as communications that (i) contained inaccurate or misleading statements regarding the potential benefits of investing in real estate programs; (ii) emphasized the distribution paid by a real estate program while failing to adequately explain that some of the distribution constitutes return of principal; and (iii) have not provided sufficient discussions of the risks associated with investing in the products in order to balance the presentation of benefits.  The Regulatory Notice provides guidance on communications concerning real estate investment programs with respect to disclosures, use of distribution rates, claims of stability, redemption and liquidity features, prior performance, use of indices and comparisons, use of pictures of specific properties and inclusion of capitalization rates.

Regulatory Notice 13-18 is available here.