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Written by 5:52 pm FINRA SEC Sanctions, Securities Fraud Articles

David Lerner Associates: Complaints, Regulatory Actions

David Lerner Associates: Complaints, Regulatory Actions, featured by top securities fraud attorneys, the White Law Group

The White Law Group reviews the regulatory history of David Lerner Associates.  

David Lerner Associates (CRD#5397) functions as a licensed broker-dealer, offering comprehensive independent brokerage services to both individual investors and financial advisors. 

As a registered broker-dealer, David Lerner Associates falls under the regulatory purview of the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). This means adherence to industry regulations and standards to safeguard the interests of clients. Any failure to meet these standards, whether by the firm or its brokers, can lead to disciplinary measures, fines, or other sanctions levied by state and/or federal regulators.

David Lerner CEO Under Investigation 

June 5, 2024: The CEO and president of David Lerner Associates Inc. is reportedly under investigation by the Financial Industry Regulatory Authority Inc. (FINRA) for allegedly inappropriately selling proprietary energy funds to clients, according to Investment News this week. 

This investigation, known as a “Wells Notice,” signifies FINRA’s intent to bring charges against him. The allegations are like those against another executive at the firm two years ago. The self-regulator alleges that the executive failed to supervise the sale of in-house energy funds and recommended them to clients without sufficient basis. These funds, Energy 11 L.P. and Energy 12 L.P., are high-risk private placements sold exclusively by David Lerner Associates.  

History of Regulatory Issues

Despite the investigation, the firm reportedly claims the investments were suitable for customers and have provided profits and annual distributions. David Lerner Associates, based in Syosset, Long Island, has a history of regulatory issues, including penalties related to unfair sales practices and excessive markups in the past. Energy 11 L.P. was formed in 2013 and raised $374 million from investors.  

The firm reportedly has 40 disclosure events including 21 regulatory actions and 19 arbitrations on its broker report or CRD. FINRA, the self-regulator that oversees brokers and brokerage firms and the SEC (Securities and Exchange Commission) may impose sanctions such as censures, fines, suspensions and restitution, among others. Regulatory actions can have serious consequences for a broker-dealer’s profile and reputation.   

Arbitration awards are also reported on a firm’s CRD, often related to customer disputes. These awards typically indicate the outcome of arbitration proceedings, which could result in financial compensation for unhappy customers. The presence of multiple arbitration awards against a broker or firm can indicate a history of unresolved customer complaints or poor conduct.  The following is a brief review of publicly available information regarding David Lerner Associates and its securities sales practices and FINRA regulatory history.   

To view David Lerner Associates full CRD, you can visit FINRA BrokerCheck. 

Review of Broker Misconduct and Customer Complaints   

There have been many cases of registered representatives employed by David Lerner Associates allegedly involved in broker misconduct and fraudulent activities.  Broker dealers are required to supervise their employees. If they fail to do so they may be held liable through a FINRA arbitration claim.  

May 2023: A former David Lerner Associates branch manager in New Jersey faced sanctions from FINRA due to supervisory lapses related to sales of illiquid oil and gas limited partnerships. The manager reportedly received a one-month suspension and a $5,000 fine for failing to properly investigate red flags of potentially unsuitable sales to certain customers from January 2015 to October 2019.  

Despite knowing the high risks involved, the manager allegedly approved sales of the partnerships, violating FINRA’s suitability rule and supervisory requirements. The manager, a 33-year industry veteran, voluntarily resigned from David Lerner Associates in June 2021 and signed the settlement without admitting or denying its findings. David Lerner defended the manager’s track record, stating that all customers holding the investments in question were receiving distributions and were currently profitable.  

The investments in question were Energy 11, L.P. and Energy Resources 12, L.P. funds, which were formed for oil and gas property acquisitions. David Lerner’s written rules required managers to review customer orders for suitability, but the manager allegedly failed to conduct a reasonable analysis, according to FINRA.

Unsuitable Energy Investments 

July 2022: FINRA made a preliminary determination to recommend that disciplinary action be brought against a David Lerner Associates broker in White Plains, New York. The broker reportedly has 12 customer complaints on his record for allegations of unsuitability and misrepresentation among others. 

FINRA is alleging violation of FINRA Rules 2111 and 2010 in that the broker recommended investments in Energy 11, L.P, Energy 12, L.P. and Spirit of America Energy Fund to multiple customers without a reasonable basis to believe the investments were suitable for those customers based on their investment profiles; and violation of FINRA Rules 4511 and 2010 in that he willfully caused David Lerner Associates, Inc., to maintain inaccurate books and records regarding customer investment profiles. 

May 2022: Financial advisor Jeffrey Basford from Westport, Connecticut was barred by the Financial Industry Regulatory Authority (FINRA) due to allegations of selling unsuitable energy investments to clients. 

FINRA’s investigation found that Basford reportedly refused to participate in on-the-record testimony regarding these sales. Basford has faced three customer complaints in 2021 related to unsuitability and misrepresentation/omission, particularly concerning David Lerner Associates’ proprietary energy offering, Energy 11 LP.  

Basford was affiliated with David Lerner Associates, Inc. from January 27, 2006, to May 13, 2022, according to his FINRA Broker report. 

More Regulatory Failures David Lerner Associates 

FINRA and the SEC may impose regulatory actions against financial advisors and broker-dealers such as censures, fines, suspensions and restitution, among others. Regulatory actions can have serious consequences for a broker-dealer’s profile and reputation.  David Lerner Associates currently has 40 regulatory events indicated by its CRD (broker report). The following is a brief review of a few of David Lerner Associates’ regulatory failures.  

October 2012: FINRA reportedly imposed a $14 million sanction on David Lerner Associates, Inc. for unfair practices regarding the sale of Apple REIT Ten and excessive markups on municipal bonds and collateralized mortgage obligations (CMOs). The firm was ordered to provide approximately $12 million in restitution to affected clients who purchased shares in Apple REIT Ten and to those charged excessive markups.  

The firm’s founder was reportedly fined $250,000 and suspended from the securities industry, followed by a two-year suspension from acting as a principal. The firm’s Head Trader was fined $200,000 and suspended for six months.  

According to FINRA, the firm and its executives allegedly targeted unsophisticated investors, failing to perform adequate due diligence on the REIT’s suitability for investors and making misleading claims about investment returns. David Lerner Associates was required to make changes to its supervisory systems, training programs, and advertising procedures as part of the settlement.  

Failure to Supervise   

All broker-dealers have a responsibility to adequately supervise its employees. They must ensure the necessary procedures and systems to detect misconduct.  Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.   

When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration.   

If your broker has defrauded you, you may be able to file a FINRA claim against your brokerage firm. FINRA arbitration can be a complex and technical process, and having an experienced attorney who is knowledgeable about securities law can greatly increase your chances of success.         

Class Action vs. Individual FINRA Arbitration Lawsuit 

You may wonder whether a large class action lawsuit is a better litigation option than an individual FINRA arbitration case.  The answer depends on many factors, but typically if the loss sustained is large (say larger than $100,000), an individual arbitration claim is likely a better option.  Class actions as a recovery option are more appropriate for grouping large numbers of individuals who have small claims – too small to generally pursue individually. 

 How to Recover Investment Losses     

If you have suffered losses investing with David Lerner Associates or if you believe that you have been the victim of securities fraud, The White Law Group may be able to help you by filing a FINRA claim.  To contact the firm, please call 888-637-5510          

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.                

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.                 

With over 30 years of securities law experience,The White Law Group has the expertise to help investors defrauded in securities.  With offices in Seattle, Washington and Chicago, Illinois, the firm reviews securities fraud cases throughout the country.  


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