NASAA Reportedly Reevaluating Non-Traded REIT Concentration Proposal

The North American Securities Administrators Association is reportedly reevaluating the proposed revisions to its Statement of Policy Regarding Real Estate Investment Trusts, that would have state legislators cap the amount of non-traded alternative strategies in individual investor portfolios at 10%, among other changes.

During NASAA’s national meeting in San Diego last month, the organization announced that it was changing course on the proposal, as reported by staff of the Institute for Portfolio Alternatives who were in attendance.

“IPA learned that NASAA would be withdrawing the current REIT proposal while attending the organization’s annual meeting in San Diego. This is a welcome development following significant advocacy by the IPA and others,” said IPA president and CEO Anya Coverman. “Reconsidering the statement of policy is an investor-first decision that acknowledges the high number of concerns raised with NASAA during the comment period.”

NASAA has not issued a formal statement regarding the course change, but Andrew Hartnett, who serves as Iowa’s principal securities regulator and is the immediate past president of NASAA, reported similar news at the Alternative & Direct Investment Securities Association annual conference this week in Las Vegas during a legislative and regulatory update panel.

John Grady, co-chair of ADISA’s Legislative & Regulatory Committee and host of the panel, explained to The DI Wire that, “NASAA is basically going back and starting over. They listened to the concerns of the industry, as expressed by ADISA and many others, and realized further review and public comment is required before possibly re-proposing the rule.”

In an interview with Fundfire, Grady also reported that, “For now, the guidelines are not being positioned for a vote and are presumably going to go through the internal process and come back up in changed form for consideration by NASAA at a future date.”

NASAA unveiled the proposal in early July 2022 and initially had a 30-day comment period. The comment period was subsequently extended at the urging of several industry trade groups, and then essentially shelved the measure instead of acting on it last year following significant push back.

“We appreciate NASAA pressing pause on this proposal. Should they re-propose a rule in the future, that would trigger a new internal comment process for state regulators to provide input, which would later be followed by an external public comment process,” explained Coverman. “We expect the NASAA Corporate Finance Section to undertake a thoughtful review and work to develop consensus on the wisest path forward. Given the importance of this issue to the industry, we will continue to follow this issue closely and remain very engaged.”

NASAA’s membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, the 13 provinces and territories of Canada, and the country of Mexico. NASAA members are responsible for administering state and provincial securities laws.

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