Regulatory Compliance

Where the frameworks
fall short.

Dealers have a documented obligation to understand every product they shelve. Four major due diligence frameworks define what that means. None of them were built for Canadian private REITs. Our forensic platform was.

105
Firms reviewed in
CIRO Phase 2 sweep
#1
Deficiency: alternatives
comparison undocumented
0
Existing DD frameworks
built for Canadian private REITs
Industry Frameworks

Three standards. One gap.

The most widely referenced due diligence frameworks each define what advisors should know about alternative products. All three leave the same blind spot: asset-class-specific forensic analysis for private real estate vehicles.

CIRO / Client Focused Reforms
Regulatory Floor
The minimum standard under NI 31-103 for Canadian dealers. Requires documented understanding of structure, features, risks, costs, and a comparison against reasonable alternatives. The Phase 2 sweep found the alternatives comparison was the most common deficiency.
Product structure & features
Issuer & manager track record
Fee impact on returns
Liquidity & redemption terms
Risk factor documentation
Reasonable range of alternatives
AIMA / SBAI
Institutional Standard
The institutional-grade framework used by allocators globally. The 2025 DDQ is modular with a liquid alternatives module relevant to Canadian Alternative Mutual Funds. Covers governance, valuation, risk, and conduct — but not asset-class-specific financial forensics.
Disclosure practices
Valuation methodology & independence
Risk management processes
Fund governance & board independence
Shareholder conduct standards
Operational controls
Kitces / SEC Guidance
Advisor Playbook
The most actionable framework for advisors recommending private funds. Operates at client level and manager level. The SEC has been explicit that marketing materials alone are insufficient — advisors must document the full process independently.
Investment strategy adherence
Operational controls & third-party oversight
Fee structure & leverage provisions
Position-level transparency
Background checks on principals
Audited financials from independent auditor
Criteria Mapping

What we cover. What we don't.

Every due diligence criterion from all three frameworks, mapped against our forensic platform. Green means we cover it at institutional depth. Yellow means partial. Red means outside scope — and a potential future module.

Due Diligence Criterion Framework Source RF Coverage How We Address It
Product structure & features CIRO / CFR Fully Covered Trust structure, distribution mechanics, DRIP, redemption terms, unitholder rights — extracted and modeled from offering memoranda and audited financials.
Fee structure & impact on returns CIRO / Kitces / SEC Fully Covered Full fee decomposition: management fees, performance fees, acquisition fees, disposition fees, financing fees. Modeled as % of NOI, % of GAV, and per-unit impact on AFFO.
Reasonable range of alternatives CIRO / CFR Fully Covered Private REITs benchmarked against the full Canadian public apartment REIT universe — same metrics, same methodology, directly comparable. The #1 compliance gap identified in the Phase 2 sweep.
Risk factor documentation CIRO / AIMA Fully Covered Leverage risk, interest rate risk, concentration risk, liquidity risk, valuation risk — each quantified and stress-tested across the full historical period, not described qualitatively.
Valuation methodology & independence AIMA / SBAI Fully Covered Multi-tier implied cap rate analysis. Independent NAV reconstruction from forensic model vs. management-stated NAV. Identifies whether valuations are independently appraised or manager-determined.
Liquidity & redemption terms CIRO / Kitces Fully Covered Redemption restrictions, lock-up periods, queue mechanics, and historical redemption request fulfillment rates — extracted and documented from offering documents.
Issuer & manager track record CIRO / CFR Fully Covered Multi-year forensic assessment of operating performance, capital allocation decisions, and per-unit value creation. FY2015–present for public REITs, full available history for private.
Investment strategy adherence Kitces / SEC Fully Covered Stated strategy vs. actual capital deployment — tracked over the full cycle. Acquisition discipline, geographic drift, leverage policy adherence, development exposure vs. stated mandate.
Distribution sustainability analysis CIRO / Kitces Fully Covered RF-AFFO payout ratio, CFS-FCF coverage, return-of-capital decomposition, distribution as multiple of earnings — the core forensic question for private REIT investors.
Leverage & capital structure risk All three Fully Covered Leverage amplification testing, debt maturity profile, interest coverage, and the amplification ratio — does leverage create or destroy per-unit value over the full cycle.
Disclosure practices AIMA / SBAI Fully Covered Disclosure quality assessment across reporting periods. Identifies non-standard metrics, inconsistencies between OM disclosures and audited financials, and selective disclosure practices.
Risk management processes AIMA / SBAI Fully Covered Interest rate hedging strategy, geographic concentration limits, development exposure caps, leverage policy frameworks — assessed against actual behavior over the full reporting history.
Governance & board independence AIMA / SBAI Fully Covered Board composition, trustee independence, related-party transaction disclosure, and alignment of governance structure with unitholder interests — extracted from offering memoranda and annual filings.
Operational controls & third-party oversight Kitces / SEC Partial Auditor identity and independence documented. Fund administrator and custodian arrangements flagged where disclosed. Full operational DD (on-site, process mapping) is outside current scope.
Background checks on principals Kitces / SEC Outside Scope Regulatory history and public filings are noted where available. Comprehensive background investigations require specialized providers and are not part of the forensic financial platform.
Why This Matters for Dealers The CIRO Phase 2 compliance sweep reviewed 105 firms and found the "reasonable range of alternatives" requirement was the most commonly deficient area. For exempt-market products with no analyst coverage and no public price discovery, that comparison doesn't exist unless someone builds it. Our forensic platform benchmarks private REITs against the full Canadian public apartment REIT universe using the same institutional-grade methodology — satisfying the specific compliance gap regulators are actively testing for.
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