FINRA (Financial Industry Regulatory Authority)

FINRA is a self-regulator with legal force, because broker-dealers must join it to sell securities.

FINRA describes itself as 'a private not-for-profit membership organization that is responsible under federal law for supervising our member firms,' registered with the SEC and working under its supervision, with operations funded by member fees. Exchange Act section 15(b)(8) makes it unlawful for a registered broker-dealer to effect securities transactions unless it belongs to a securities association registered under section 15A, unless it trades solely on an exchange where it is a member.

Its listed work is writing and enforcing rules for member firms and their representatives, examining firms for compliance, monitoring markets for manipulation, administering the qualification exams anyone selling a securities product must pass, returning money to harmed customers where possible, barring violators from membership and running a dispute resolution forum.

Several FINRA rules touch a DST sale directly:

• Rule 2111 on suitability, which yields to Regulation Best Interest for retail recommendations.
• Rule 5123, requiring the PPM or term sheet to be filed within 15 calendar days of the first sale.
• Rule 2040, barring commissions to unregistered persons who would need to register.
• Regulatory Notice 23-08, on the reasonable investigation owed before recommending a private placement.

Before a hypothetical DST purchase, a BrokerCheck report shows who you are dealing with.

Hypothetical: a representative recommends a $750,000 DST interest. A BrokerCheck report for that person lists the firms where they are or were registered, ten years of employment history from their last Form U4, their current registrations and a disclosure section covering customer disputes, disciplinary events and certain criminal and financial matters, some of which may be pending.

To register, individuals must pass the Securities Industry Essentials exam and one or more qualification exams, and the report shows which they hold. Check the firm too, then match it to the sales compensation recipient named in Item 12 of the offering's Form D. A pending matter is an allegation, not a finding, but it is a fair question to put to the representative before exchange funds are committed.

It bites at the edges of FINRA's reach: it regulates the seller, not the sponsor or the tax result.

FINRA's rules bind its members and their people; the DST sponsor, the trust and the property are outside its rulebook except through the selling firm's diligence. Its dollar caps on offering costs in Rule 2310 apply to public programs, not to a Rule 506 DST; see offering load.

Nor does FINRA decide whether an interest qualifies for section 1031. Read sponsor quality at evaluating DST sponsors and the role of the seller at broker-dealer.