The Financial Industry Regulatory Authority (Finra) is looking to introduce rule changes for real-estate investment trusts (REIT) to the Securities Exchange Commission (SEC) by the end of this year.

The rule changes aim to increase the amount of information brokers and agents are required to disclose to investors regarding the products they offer. REITs have traditionally not been required to disclose present or real values to investors. This would often produce over inflated valuations of REITs that lacked depreciations for fees and the fall of the value of associated properties.

“Investors should expect to be fully informed of the risks and costs of their investments,” commented Peter Mougey, shareholder with the Levin, Papantonio law firm and the director of the firm’s business torts and securities litigation department.

REITs are known to go years without having their value reassessed. This can create pitfalls for investors who are not aware that their assets may have depreciated far below their original estimation.

The REIT industry was booming in the 1990s and didn’t really come into the regulatory agency’s crosshairs until 2011 when David Lerner Associates, Inc. was sued by Finra for misleading investors. As a result of the lawsuit, the company has agreed to pay $12 million in restitution to investors and a $2.3 million fine. However, the firm was not required to admit any wrongdoing.

Some in the industry are welcoming the increased oversight, feeling that it will encourage healthier investing practices.

“I know it’s not popular with the sponsors, and I know it’s not popular with their advisors, but change isn’t always popular, Nicholas Schorsch a cofounder of AR Capital, told the Wall Street Journal.  “As long as the product continues to perform, we’re very excited about it.”

“The additional oversight of REITs from FINRA is a welcomed first step,” Mr. Mougey added, “but overall many of the REITS have ridiculously high costs and are not viable options for a low cost mutual fund option.”

Joshua is a writer and researcher with Ring of Fire. You can follow him on Twitter @Joshual33.