The Consumer Federation of America, along with several organizations who represent and advocate for retail investor rights, submitted comments in strong support of the North American Securities Administrators Association’s proposed revisions to its Statement of Policy regarding Real Estate Investment Trusts.

The NASAA proposal would enhance protections surrounding the offer and sale of non-traded REITs to retail investors in four primary ways, including: (1) an update to the conduct standards for brokers selling non-traded REITs; (2) an update to the net income and net worth financial figures in the suitability section; (3) the addition of a new standardized concentration limit to the suitability section; and (4) the addition of a new prohibition against using gross offering proceeds as an investment objective or strategy to make distributions.

In offering this support, the letter observed that non-traded REITs, which are often marketed and sold to retail investors and retirement savers, carry significant risks, including liquidity risk, valuation risk, income risk, and principal risk. In addition, non-traded REITs are extraordinarily high-cost investments, rife with conflicts of interest, that can drain investors’ hard-earned money and underperform less risky alternatives.