David Lerner Associates’ Fiduciary Compliance on Apple REITs Under Investigation
By GAIL LIBERMAN
I don’t know about you, but I’ve run into reps of David Lerner Associates Inc., Syosset, N.Y., soliciting over the last few years at West Palm Beach convention center events.
Plus, I still see the company heavily advertise on TV. Lerner advertises its investment as, the “Middle Ground of Investing.”
But the higher the yield, the greater the risk. You and your advisor both need to make sure the safety, liquidity and yield of your investment is suitable for your specific financial situation.
David Lerner Associates might have neglected this duty, according to the Financial Industry Regulatory Authority (FINRA) and attorney Lawrence L. Klayman of the Boca Raton law firm Klayman & Toskes.
Lerner, who, last I checked, continues to hold seminars, has been the subject of a complaint by FINRA concerning sales of shares in a non-traded Real Estate Investment Trust. The self-regulatory agency, in the latest complaint against the company, claims that David Lerner Associates failed to conduct a reasonable investigation to determine whether this investment was suitable for investors. Plus, FINRA says the company provided misleading information on its web site concerning the investment’s distributions. The charges largely are in connection with Apple REIT Ten.
David Lerner Associates has been the sole underwriter for Apple REITS since 1992, selling nearly $6.8 billion of the securities to some 122,600 customer accounts, FINRA says. It allegedly earned 10 percent of all offerings of the securities in addition to other fees — tallying over $30 million. Largely, the company targeted older, unsophisticated customers, according to FINRA.
Under FINRA rules, companies can request a hearing before a FINRA disciplinary panel. Remedies can range from a fine to payment of restitution and suspension from the securities industry.
In response, Lerner vehemently denied FINRA’s allegations and cited its 35 years of service. “It is apparent to us that (David Lerner Associates) and other small firms have become the scapegoats for FINRA’s utter failure to address Madoff’s fraudulent scheme,” the statement said.
Lerner noted the U.S. Securities and Exchange Commission thoroughly reviewed Apple REIT Ten’s registration statement for compliance and declared the offering effective. It denied it targets unsophisticated and elderly customers or overlooked any valuation and distribution irregularities.
Boca Raton attorney Klayman, who is investigating potential claims for David Lerner customers, observes that Lerner’s company heavily solicited on the East Coast, Florida and Long Island. He says his own clients are from New Jersey.
“I’m shocked that 60 percent to 70 percent of the business has been Apple REITS,” Klayman says. “Obviously, that investment can’t be suitable for everybody. Too many customers own this product.
“It’s not appropriate unless you have tons of money, and this makes up about 1 percent of your (holdings).
“I hope he has the funds to pay off claims. That’s what I’m concerned about.”
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