The short answer
You need a registered person, though not necessarily one called a broker. A DST interest is a security, and under 15 U.S.C. section 78o(a)(1) nobody may be paid to effect or induce its sale unless registered as a broker-dealer and, under section 78o(b)(8), a member of FINRA; the alternative is a registered investment adviser under 15 U.S.C. section 80b-3, who recommends the interest and is paid by you rather than by the offering. The only lawful no-broker route is the issuer's own unpaid personnel under SEC Rule 3a4-1, which sponsors rarely use for retail subscriptions. A no-load or fee-based pitch therefore changes who is paid and how, not whether a regulated person stands between you and the trust. Whichever route you take, the interest is a restricted security that cannot be redeemed or sold on any market and can lose its full value.
At a glance
| Broker-dealer rule | Unlawful to effect or induce a securities transaction for compensation without registration and FINRA membership |
|---|---|
| Adviser rule | An investment adviser must be registered with the SEC or a state before using the mails or interstate commerce for its business |
| Issuer exemption | An issuer's employee is not a broker only if unpaid by transaction, not associated with a broker-dealer, and within activity limits |
| Unregistered introducers | A member firm may not pay compensation to a person who should be registered and is not |
| Broker's standard | Regulation Best Interest: act in the retail customer's best interest at the time of the recommendation |
| Form CRS | Two pages, four for a dual registrant, delivered before or at the recommendation, with a fees and conflicts section |
| Compensation disclosure | Material fees and costs, and all material facts about conflicts, in writing |
The law does not require a broker; it requires that whoever sells you the security be registered as something
15 U.S.C. section 78o(a)(1) makes it unlawful for a broker or dealer to use the mails or any means of interstate commerce to effect any transaction in, or to induce the purchase or sale of, any security unless registered under section 78o(b), and section 78o(b)(8) requires a registered broker-dealer to be a member of a registered securities association. A DST beneficial interest is a security sold in a private placement, as explained on is a DST a security and who can sell me one, so the person placing it with you is inside that rule.
The second lawful route is advice rather than sale. Under 15 U.S.C. section 80b-3(a) an investment adviser may not use the mails or interstate commerce in its business unless registered with the SEC or, below the federal threshold, with a state. A registered adviser can recommend a DST, arrange the subscription with the sponsor or its dealer-manager, and charge you a fee; what it cannot do is take a commission from the offering without broker-dealer registration.
Many representatives hold both registrations. Regulation Best Interest requires a firm making a recommendation to disclose, in writing, the capacity in which it acts, the material fees and costs, and all material facts about conflicts, and the Form CRS must reach you before or at the recommendation with a section on fees, costs, conflicts and standard of conduct. Ask which capacity applies to this recommendation and keep the answer.
Buying direct from the sponsor: the exemption exists, and it is narrower than the phrase suggests
SEC Rule 3a4-1 is the safe harbor under which an issuer's partner, officer, director or employee is not treated as a broker for participating in the sale of the issuer's securities. The conditions are cumulative: the person is not subject to statutory disqualification, is not paid commissions or other remuneration based directly or indirectly on securities transactions, is not an associated person of a broker-dealer, and meets one of three activity limits, most commonly that they primarily perform substantial duties for the issuer unrelated to securities, were not a broker-dealer associate in the prior twelve months, and participate in no more than one offering every twelve months.
A sponsor that raises money in a new trust every few months, through people whose job is raising it, cannot fit those limits. That is why sponsors sell through a dealer-manager and a selling group of broker-dealers and advisers, and why a subscription package arrives from a registered firm rather than from the sponsor's marketing department. The memorandum's plan of distribution names the dealer-manager; reading a DST PPM and Form D shows where, and Form D names everyone paid sales compensation.
There is a second reason the direct route is closed in practice. Under FINRA Rule 2040 a member firm may not pay compensation to any person who would have to register as a broker-dealer because of those payments and has not, so your real estate agent, your intermediary and your CPA cannot be paid for steering you into a trust.
What a no-load pitch leaves out: the commission is in the offering, the adviser's fee is on your statement, and both are real
A no-load pitch means the adviser is not taking the selling commission the offering allocates; it does not always mean the offering has no load, and it never means the adviser works free. An adviser is paid by you, usually a percentage of assets each year for as long as you hold the interest. On an illiquid DST that fee is charged on a value the sponsor reports, not a market price, and it continues through years in which the trust pays nothing. Ask how the interest is valued for billing and what the fee totals over the projected hold.
A commission pitch has the mirror-image omission: the selling commission, dealer-manager fee and marketing reimbursements are paid once, out of the equity you wire, and reduce the money that reaches the real estate. FINRA Rule 2310 presumes total underwriting compensation above 10 percent of gross proceeds unfair in public direct participation programs, a yardstick for a private DST's load. The dollar comparison between a one-time load and an ongoing fee, and the ten questions to put in writing, are on advisor fees and conflicts for DSTs.
Neither pitch answers the question that matters most. The load and the fee are both small next to the risk that the trust's property loses its tenant, that the loan matures into a weak market, or that you need the money before the sponsor sells; those are the same under both routes.
What a DST broker does for you that the rule requires, and what it does beyond the rule
The rule requires a registered person to build your investment profile, judge the recommendation against it, disclose capacity, fees and conflicts, and deliver the memorandum. Beyond that, the useful work is selection and timing: which sponsors and structures are open to you, which offerings fit the debt and equity you must replace, and whether a reservation can be made before day 45. Our DST broker page describes that role; the roles of a qualified intermediary and a DST advisor separates it from the party holding your money.
Our own structure is on why choose us: we do not operate our own DSTs or steer clients into in-house products, we offer direct title and cash-out structures as well as DSTs, and we are licensed in all 50 states. Each is a conflict question answered, and each should be verified on BrokerCheck using the five-step check.
Hypothetically, a seller with $1,000,000 of equity compares a commissioned subscription and a fee-based one. The commission is paid once from the offering; the adviser's fee is charged every year on a reported value through a seven-year hold. Which costs less depends on the rate, the hold and whether the trust pays through, so put both in dollars over the full period with your CPA before choosing a route, and put the trust's loan and lease in front of the CPA at the same time.
Related questions
Can my real estate agent sell me a DST?
Only if separately registered as a representative of a broker-dealer or as an investment adviser. An agent cannot be paid by the sponsor or its dealer-manager for the introduction, and a firm that pays one is breaking FINRA Rule 2040.
Can I find a DST on my own and just send the sponsor the money?
Current offerings are not listed publicly because most are sold under Rule 506(b), which bars general solicitation, and the sponsor's dealer-manager will route you to a registered firm for the suitability and accreditation file; see why DST offerings are not listed online.
Is a fee-only adviser a fiduciary and a broker not?
An adviser owes a fiduciary duty under the Advisers Act; a broker owes the best-interest standard of Regulation Best Interest at the time of the recommendation. Both must disclose conflicts, and neither standard makes an illiquid trust liquid.
Do I need a broker if I am not using a 1031 exchange?
Yes. The securities rules apply whether or not exchange funds are involved; what changes is the absence of an intermediary and the deadlines, as explained on investing in a DST without a 1031.
Does Breakwater Exchange charge me a separate fee?
How a broker on any offering is compensated is disclosed in that offering's memorandum; ask for the dollar figure before you sign, from us or anyone else. The proposal itself is free, as described on what a proposal contains.
Sources
Checked against these publications on October 8, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.
- 15 U.S.C. section 78o, registration and regulation of brokers and dealers
- 15 U.S.C. section 80b-3, registration of investment advisers
- 17 CFR 240.3a4-1, associated persons of an issuer deemed not to be brokers
- FINRA Rule 2040, Payments to Unregistered Persons
- FINRA Rule 2310, Direct Participation Programs
- 17 CFR 240.15l-1, Regulation Best Interest
- SEC, Form CRS Relationship Summary: Small Entity Compliance Guide
- SEC, Private placements: Rule 506(b)