The term originates from the Securities Act of 1933 and NASD Rule 2810, which addresses the regulation of compensation, fees and expenses in public offerings of DPPs.
Direct participation programs are most commonly formed to invest in real estate, energy, futures & options, and equipment leasing projects.
A non-listed real estate investment trust enjoys a special tax-free status if its distribution of income is sufficient, and as such may be organized as a corporation without being subject to double taxation.
Broker/dealers have alternative investment platforms that include these funds and are paid commissions for their role in distribution and servicing.
The compliance and operational aspects of sponsoring these funds are more complicated due to the involvement of retail investors and the payment of trailing commissions.