FINRA Charges David Lerner & Associates Unsuitable Recommendations and Misrepresentations and Omissions Regarding Apple REITs

On May 31, 2011, the Financial Industry Regulatory Authority (FINRA) filed a complaint against brokerage firm David Lerner & Associates, Inc. (DLA), of Syosset, NY. FINRA has charged the brokerage firm with soliciting investors to purchase shares in Apple REIT Ten, a non-traded $2 billion Real Estate Investment Trust (REIT), without conducting a reasonable investigation to determine whether it was suitable for investors. FINRA also charged David Lerner & Associates with providing misleading information on its website regarding Apple REIT Ten distributions. The brokerage firm sold the risky, illiquid Apple REIT Ten securities to numerous unsophisticated and elderly customers.

David Lerner is the President of David Lerner & Associates. He is known in the greater New York City area for his "Take a Tip from Poppy" radio segments, and he often obtain new clients by through investment seminars that he hold in the New York metropolitan area and in Florida. Recent seminars have been held at the Boca Raton, Florida Marriott, Trumbull, Connecticut Marriott, the Watermill Inn in Smithtown, NY, the Sheraton in Eatontown, NJ, and the Doubletree Hotel in Tarrytown, NY.

David Lerner & Associates was the lone underwriter of the Apple Reit Ten securities. The brokerage firm sold more than $300 million of the $2 billion Apple REIT Ten securities offering since January 2011. The securities invest in extended stay hotel properties. Apple REIT Ten and other closed Apple REITs were founded by the same individual and are under common management. In total, David Lerner & Associates has sold nearly $6.8 billion of the securities to approximately 123,000 customer accounts. It has been reported that Apple REIT sales have generated $600 million for David Lerner & Associates DLA, which amounts to 60 to 70 percent of the firm's business since 1996.

The FINRA he complaint against David Lerner & Associates alleges that since at least 2004, the closed Apple REITs have unreasonably valued their shares at a constant price of $11 notwithstanding that the underlying assets actually fluctuated in value and had poor performance. All the while, the Apple REITs continued to pay steady distributions of 7 to 8 percent through borrowings and returning capital to investors.

FINRA alleges that DLA failed to sufficiently investigate the valuation and distribution irregularities of the closed Apple REITs before it sold Apple REIT Ten. Pursuant to FINRA rules, brokerage firms are obligated to conduct due diligence to learn about the products that they sell and to determine whether the investments should be sold to customers at all. As the lone underwriter of all of the Apple REITs, David Lerner & Associates was aware of the Apple REITs' improper valuation and distribution practices. But the brokerage firm seems to have turned a blind eye to obvious red flags in favor of reaping massive profits, all investors' expense.

David Lerner & Associates' website provided distribution rates for all of the previous Apple REITs that were misleading and omitted material information because they did not disclose recent distribution rate reductions or that distributions far exceeded income from operations and were funded by debt that further leveraged the REITs.

Investors who purchased Apple REITs from David Lerner & Associates may be able to recover their investment losses through FINRA arbitration. Dimond Kaplan & Rothstein, P.A. handles such cases on contingency-fee basis, meaning we do not get paid unless and until we recover money for our clients. We also advance all costs in such cases, including the FINRA filing fee. This means that our clients will incur no out-of-pocket costs during the course of the case. Please contact a lawyer at Dimond Kaplan & Rothstein, P.A. at (888) 578-6255 or jkaplan@dkrpa.com for a free consultation. Our law firm has office in Miami and West Palm Beach, Florida, New York, New York, and Los Angeles, California.

Share This Story

Share your experience with investment fraud, and contribute to a community dedicated to protection and empowerment. Together, we can unveil strategies, share insights, and build a shield against financial deceit.

Let’s Discuss Your Case Today

When fighting for your rights, you may go up against some dangerous enemies. You want an attorney flying by your side to help navigate you through the twists and turns of the legal system. 

I Want To...
No Recovery, No Fees (888) 578-6255

Subscribe to our email!

Subscribe to our email!

Subscribe to our email!

uploadmagnifiercross linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram