The National Association of Realtors (NAR) has petitioned the Securities and Exchange Commission for exemption under Sections 15(a)(2) and 36(a) of the Securities Exchange Act of 1934 from the broker-dealer registration requirements for real estate brokerage firms and licensed real estate agents who sell individual tenant-in-common interests in real property (TIC Security) and receive a real estate advisory fee either from the purchaser or issuer of the TIC Security. TIC Securities are sold by a sponsor through a broker-dealer acting as placement agent. The SEC estimates there are 5,304 TIC Security Transactions a year that would include 800 commercial real estate professionals and approximately 150 selling broker-dealers
Conditions undertaken by NAR included: (a) a real estate advisory fee could only be paid to an experienced, knowledgeable and licensed commercial real estate professional predominantly engaged in the sale of real estate other than TIC Securities; (b) each client would receive at closing a deed to his undivided factional interest in the TIC Security; (c) the client would enter into a written agreement with the real estate participant; (d) the agreement would disclose the maximum real estate advisory fee or a formula for its computation; (e) the client is advised as to the characteristics of TIC Securities and may inspect the subject property; (f) the real estate participant cannot (1) advertise TIC Securities, (2) share the fee with anyone not listed in the agreement with the client; (3) handle customer funds or securities in a TIC transaction, (4) negotiate a TIC purchase on behalf of the client, (5) act as a “purchaser’s representative” under Regulation D, (6) participate in structuring an offering of TIC Securities, or (7) assist a client to obtain funds to buy a TIC Security other than to provide a list of potential lenders; (g) the commercial real estate representative can not be subject to a statutory disqualification under the Exchange Act and must certify such at the closing to the selling broker-dealer; (h) the selling broker-dealer must perform a suitability analysis of the customer and if it determines the TIC Security is unsuitable for the customer, not effect the transaction without the customer’s written affirmation that it wishes to proceed. The SEC estimates that will be the case in 5% of the transactions.
The petition is open for public comment. http://www.sec.gov/rules/other/2007/34-56779.pdf