Senate OKs bill to allow states to tax online sales | House will consider bill to curb SEC rule writing | State regulators oppose mandatory arbitration for investors
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May 9, 2013
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IPA comments on FINRA notice about risks of nontraded REITs
The Financial Industry Regulatory Authority says some brokers are misleading clients about potential benefits of nontraded real estate investment trusts. FINRA officials say some materials emphasize investment income but don't make it clear that investors' principal might be tapped. FINRA has warned brokers not to use words such as "yield" and to spell out rules on redeeming investments. "FINRA notices like this recent release are models for proper investor communication protocols," IPA President and CEO Kevin Hogan said in a statement. Thomson Reuters/News & Insight (5/3), InvestmentNews (free registration) (5/3), The Wall Street Journal (tiered subscription model) (5/2)
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Policy Update
Senate OKs bill to allow states to tax online sales
The Senate voted 69-27 to pass a bill authorizing states to collect sales tax on online transactions, even if the seller has no physical presence in the state. House Speaker John Boehner, R-Ohio, plans to refer the measure to the House Judiciary Committee. A spokeswoman for committee Chairman Bob Goodlatte, R-Va., said he has reservations about the measure's potential effect on small businesses and its complexity. Reuters (5/6), PCWorld/IDG News Service (5/6), CNNMoney (5/7), The Washington Post (tiered subscription model)/The Associated Press (5/6), The New York Times (tiered subscription model) (5/6)
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House will consider bill to curb SEC rule writing
The House of Representatives will consider a bill that would force the Securities and Exchange Commission to conduct cost-benefit analyses of any regulations the body writes. The SEC Regulatory Accountability Act was introduced by Rep. Scott Garrett, R-N.J., in March. The Hill/RegWatch blog (5/3)
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State regulators oppose mandatory arbitration for investors
The North American Securities Administrators Association, which represents state securities regulators, has called on the Securities and Exchange Commission to bar investment advisers from forcing clients to resolve disputes through arbitration and give up their right to go to court. "It has been our longstanding position that the 'take it or leave it' approach represented by these mandatory clauses is harmful to investors," NASAA President A. Heath Abshure wrote in a letter to SEC Chairwoman Mary Jo White. Reuters (5/4), InvestmentNews (free registration) (5/4)
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Di Florio is leaving SEC to head up FINRA risk division
Carlo di Florio, head of the Securities and Exchange Commission's national examination program, is taking a new job as head of the Financial Industry Regulatory Authority's recently created risk and strategy office. Di Florio, who joined the SEC in light of the Bernard Madoff scandal, will be replaced by Andrew Bowden, who is now serving as the SEC's deputy director of compliance, inspections and examinations. Reuters (5/2)
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Industry News
CommonWealth REIT is challenged over outside management
CommonWealth REIT's use of outside managers to decide when to buy and sell each property is raising objections from shareholders, who note that the managers' interests might differ from those of investors. "The adviser does well if the REIT gets bigger, but the shareholders may not be well served by the REIT getting bigger," said Jim Sullivan, a managing director at researcher Green Street Advisors. CommonWealth is facing an attempt by its second-biggest investor to remove the board. Financial Advisor online (5/3)
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Income Planning
PIMCO's El-Erian sees changing dynamics for advisers
Pacific Investment Management CEO and co-Chief Investment Officer Mohamed El-Erian says investing dynamics are changing, and financial advisers must adjust their approaches to continue to serve clients. Advisers must be aware of not only how risk dynamics are evolving but also how investor and family dynamics are changing and possibly adjusting client objectives, El-Erian says. AdvisorOne (4/29)
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Alternative investments can pay off with diversified core
To the traditional world of core and alternative assets, many investors are adding diversifiers, including commodities, emerging-market stocks, real estate and natural resources. Alternatives outside these categories show mixed performance over the long term but can be valuable add-ons if a portfolio is diversified. Financial-Planning.com (5/1)
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Industry leaders warn clients about bond losses
Investment advisers say they are proactively warning clients about the negative effect that rising interest rates can have on their bond portfolios. With many clients in or approaching retirement, advisers stressed the importance of communicating to clients the risk of high interest rates on their returns and the importance of a diversified portfolio. InvestmentNews (free registration) (5/3), Financial Advisor online (5/3)
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IPA Member Information
IPA board of directors approves first industrywide valuation guideline for nonlisted REITs
On April 25, the IPA board of directors unanimously approved the adoption of a valuation guideline for nonlisted real estate investment trusts. This guideline is a landmark for IPA and our industry. After two years of tireless work, we speak with one voice about the recommended methodology for valuing nonlisted REITs.

The valuation guideline is intended to benefit IPA members and the investing public by:
  • Conforming with institutional real estate valuation standards.
  • Enhancing the independence of the valuation process.
  • Accelerating the availability of valuation information to investors.
  • Enhancing the quality of valuation disclosure to the investing public.
Download the valuation guideline.
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SmartQuote
The soul should always stand ajar, ready to welcome the ecstatic experience."
-- Emily Dickinson,
American poet
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About IPA
The Investment Program Association (IPA) was formed in 1985 to provide effective national leadership for the direct investment industry. The IPA supports individual investor access to a variety of asset classes not correlated to the traded markets and historically available only to institutional investors. These investments include public non-listed REITs (NLREITs) and Business Development Companies (BDCs), Energy and Equipment Leasing Programs, and private equity offerings. For the last 28 years, the IPA has successfully championed the growth of such products, which have increased in popularity with financial professionals and investors alike. Direct investments are held in the accounts of more than 2 million individual investors, and the IPA's member companies operate or have properties in all 50 states. The mission of the IPA is advocating direct investments through education. Access the wealth of IPA educational materials here, or visit the IPA online for more information about becoming a member.
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