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Written by 1:26 pm Blog, Securities Fraud Articles

David Lerner Associates Investigated by FINRA

According to the Investment News, David Lerner Associates Inc. has been accused of targeting unsophisticated and elderly customers while selling real estate investment trust shares without considering whether the illiquid security was suitable for its clients.

The Syosset, New York-based brokerage, known for its “Take a tip from Poppy” advertising slogan, misled investors who bought more than $300 million of shares in the $2 billion Apple REIT Ten offering this year, the Financial Industry Regulatory Authority said today in a disciplinary complaint on its website. The firm denies the allegations, according to a statement.

In soliciting customers for Apple REIT Ten, David Lerner Associates provided misleading information about distribution rates for a series of predecessor securities that are now closed to investors, Finra said. The figures failed to show that distributions far exceeded income and were funded by debt that increased leverage in the REITs, which invest in extended-stay hotels, the regulator said.

David Lerner Associates has sold almost $6.8 billion of Apple REIT shares to more than 122,000 customers since 1992, according to Finra, the industry-funded regulator for U.S. brokerages. Those sales have generated more than $600 million, accounting for more than 60 percent of the firm’s business since 1996, Finra said.

The complaint is the first step in a formal proceeding, Finra said today. It isn’t filed in court, and the firm can request a hearing before a disciplinary panel, the regulator said in its statement.

In September, David Lerner Associates paid a $255,000 fine for failing to provide required information in connection with the replacement of variable life insurance policies and annuity contracts from November 1998 through February 2004, according to the New York State Insurance Department.

A year ago this month, David Lerner Associates was accused by Finra of overcharging customers on sales of municipal bonds and mortgage securities. That case is still pending, according to Finra’s brokerage records.

If you have questions about investments you made with David Lerner Associates, the securities attorneys of The White Law Group may be able to help.  To speak with a securities attorney, please call the firm’s Chicago office at 312/238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit our website at https://whitesecuritieslaw.com.


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