David Lerner Associates has been sanctioned by FINRA for allegedly committing unfair practices in the sale of Apple REIT Ten and for excessive markups in relation to its dealings with Municipal Bonds and CMOs. The sanctions imposed by FINRA amounted to $12 million going to cover restitution for its customers, while the firm was fined $2.3 Million in relation to the alleged markups on Municipal Bonds and CMOs which it sold during a 30 month period.
The main area of the settlement revolved around the alleged unfair practices David Lerner Associates carried out while it was selling the Apple REIT Ten. The REIT was a nontraded REIT which was illiquid in nature. The firm allegedly would sell the investment to “unsophisticated investors and the elderly” without informing them of the true nature of the product, but more importantly without carrying out their due diligence to ascertain whether or not the investment was a good match for the investor. Furthermore, the firm allegedly produced misleading marketing materials which presented investors with performance results for the Apple REITs which failed to inform investors that the income from the REITs was insufficient to support the distribution to unit owners.
The result of the settlement created a manner for investors to recuperate some of their losses, but it also fined and banned certain people within DLA. David Lerner, the company’s founder, President and CEO was fined $250,000, suspended for one year from associating in the securities industry and further suspended for two years from acting as a principal once the one year suspension expired. FINRA implemented the suspension due to allegations that David Lerner personally made false claims to investors during seminars and letters to customers about the true nature of the REITs returns, performance, and market values. His claims would allegedly be along the lines of telling investors that Apple REIT Ten would be a “fabulous cash cow” or a “gold mine”, while also making unfounded predictions that investors would make huge profits when the REIT went public. DLA’s Head Trader, William Mason, was also sanctioned by FINRA, receiving a $200,000 fine and a six month ban from associating in the securities industry due to his involvement in the municipal bond and CMO mark up scheme.
If you invested in Apple REITs or in David Lerner Associates, contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. For more information, call toll free 1-844-689-5754 or 305-912-3000.