Disclosure Rules Specific to DPP Offerings
Before agreeing to participate in a DPP offering, a broker-dealer or associated person must have reasonable grounds to believe that all material facts are adequately and accurately disclosed to investors. This belief must be based on information the program’s sponsor has made available to the broker-dealer. At a minimum material facts provided must include:
• sponsor and underwriter compensation
• physical properties of the program
• tax aspects
• financial stability of the sponsor
• experience of the sponsor
• the program’s risk factors
• conflicts of interest involving the issuer, sponsor, or broker-dealer
• any appraisals and other reports that have been prepared
Pertinent reports often include a feasibility study of the DPP. A feasibility study is an independent study that evaluates a program’s financial and operational prospects.
Before a broker-dealer may execute a purchase transaction in a DPP, it must inform the prospective investor of all facts releva