Direct Participation Program

It refers to the legal entities where the individual can invest in an option that is invested in different areas like real estate, petrol, natural gas, and other markets.

To participate you need to buy in a limited partnership, or an S corporation subchapter, or a general partnership that organizes the purchase.

The provision first appeared in the 1933 Securities Act and later was made into a FINRA rule 2310.  It includes non-traded real estate investment trusts (REITs), energy explorations, and equipment leasing.  

The investors can become a limited partner by investing in the pooling of funds with other individuals. Such programs often work like a limited partnership where the general partner manages the program and makes decisions related to it.

He has full liability related to the program, while, the investor’s liability is limited to investment in the program. Investors can lose their investment but they do not possess any personal liability in it. 

Over 50% of such programs are in areas like raw land, existing properties, government-sponsored homes, construction projects, etc. The investors gain from capital appreciation and rental earnings.

The program provides an option to average investors to buy in areas that were previously available only to the high net worth investors/individuals, at the same time as it does not require you to acquire a large stake in a particular fund or start-up

The advantages of such investment are that returns can be higher from 5 to 7% and illiquid assets provide diversification in non-traditional investing solutions. 

There can be a minimum requirement for investment like a minimum annual income or net worth to apply for it. Such options are not offered publicly, one may not receive certain financial documents related to it, also, it can create long-term illiquidity.