Charles Marsala explains: NEW FINRA Rule 2014-006 for Account Statements

Charles Marsala May 3, 2015 0
Charles Marsala explains: NEW FINRA Rule 2014-006 for Account Statements

The amended rules call for a modification of how the estimated per-share value of  non-traded Direct Placement Programs (DDPs), Business Development company (BDCs),  and non-traded REITs are reported and shown on customer account statements.

This move is being undertaken to increase transparency surrounding the costs associated with these types of investments and to improve the reliability of valuations on customer account statements.

When implementation completes in April 2016, the amended rules will apply to all existing and future non-traded REITs and non-traded DPPs. The intention of the amended rules is to reinforce investor protection with respect to REIT and DPP non-traded securities by increasing the reliability of estimated values on customer account statements. As a result, investors will be given a more accurate assessment of the investment’s estimated value.

The amended rules: A. Change the way estimated share valuations are presented on customer statements; B. establish an estimated net value of the investment by deducting sales commissions and related charges; and C. these deductions include items such as organizational and offering costs from the initial public offering price on per-share basis.

NET INVESTMENT AND APPRAISED VALUE METHODS: The amended rules provide two specific methodologies firms can use to determine a per-share estimated value that will be deemed to have been developed in a reasonable manner — the Net Investment Method and the Appraised Value Method.

The application of these methodologies will increase the consistency, frequency and accuracy of valuations and estimated share values across non-traded products.

This article is for informational purposes only and is not a complete summary of information needed to recommend any investment. Consult the appropriate professional to determine how this information applies to your unique situation.

About the Author: Charles Marsala is a Financial Advisor with Benchmark Investment Group with Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at


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