Investor Lawyers Blog
According to a news release on October 22, 2012, the Financial Industry Regulatory Authority has sanctioned David Lerner Associates Inc. and ordered the company to pay approximately $12 million to customers. The affected customers purchased Apple REIT Ten shares, which is a non-traded Real Estate Investment Trust sold by David Lerner Associates. Some customers who will be receiving restitution were also charged excessive markups. Investment fraud lawyers are still investigating potential claims on behalf of investors who purchased Apple REITs from David Lerner Associates.
David Lerner Associates is the sole distributor of Apple REITs, including the $2 billion Apple REIT Ten. According to the press release, David Lerner Associates “solicited thousands of customers, targeting unsophisticated investors and the elderly, selling the illiquid REIT without performing adequate due diligence to determine whether it was suitable for investors.” According to securities arbitration lawyers, selling non-traded REITs to customers for whom the investment is unsuitable is one of the biggest problems with non-traded REITs. Furthermore, misleading marketing materials were used in order to sell the REIT. These materials presented performance results but did not disclose that the REIT’s income was insufficient for supporting owners’ distributions.
In addition to the $12 million in restitution, David Lerner Associates was fined over $2.3 million for supervisory violations and charging unfair prices on collateralized mortgage obligations (CMOs) and municipal bonds. These unfair prices occurred over a 30-month period. According to investment fraud lawyers, victims of CMO and municipal bond fraud can also recover their losses through FINRA arbitration.