Series 22: Communication Rules For Real Estate DPPs

Communication Rules for Real Estate DPPs

FINRA requires a real estate direct participation program to make clear that an investor in the DPP is not personally purchasing any real estate.

Sometimes real-estate DPPs cite the performance of a real estate index in their marketing materials to illustrate the sector’s performance. A real estate index is similar to a stock market index such as the Dow Jones Industrial Average. Whereas the Dow boils down the performance of selected stocks into a number, a real estate index does the same for selected real estate investments. A DPP is only allowed to compare its performance to a real estate index if the investments that went into calculating the index do not significantly differ from the DPP. For example, an index of exchange-traded REITs cannot be used in this way, because a DPP is neither exchange-traded nor a REIT.

Another common marketing practice among real estate DPPs is to use photographs of