FINRA Hits Lerner for $14 Million Over Apple REIT Ten

On October 22, 2012, the Financial Industry Regulatory Authority ordered David Lerner Associates (DLA) to pay $12 million in restitution to customers who purchased Apple REIT Ten and customers charged excessive markups.

DLA, its founder David Lerner, and the head trader were fined $2.3 million. FINRA suspended Lerner from the securities industry for one year, followed by a two-year suspension from acting as a principal.

According the FINRA newsrelease, which may be accessed here, Lerner:

“personally made false claims regarding the investment returns, market values, and performance prospects of the Apple REITs at numerous DLA investment seminars and in letters to customers. To encourage sales of Apple REIT Ten and discourage redemptions of shares of the closed REITs, he characterized the Apple REITs as, for example, a “fabulous cash cow” or a “gold mine” and he made unfounded predictions regarding a merger and public listing of the closed Apple REITs, which he inappropriately claimed would result in a “windfall” to investors.”

 According to Brad Bennett, Executive VP and Chief of FINRA Enforcement,

“David Lerner and his firm targeted unsophisticated and elderly customers, grossly failing to comply with basic standards of suitability in selling Apple REIT Ten to thousands of customers. “

If you were sold Apple REIT Ten, or any of the prior Apple REITs you may be able to recover some or all of your losses through FINRA arbitration. Please contact us for a free consultation. We have been helping investors recover stock market losses for more than 20 years.

Rex Securities Law

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FINRA Announces October 2012 Disciplinary Actions

The Financial Industry Regulatory Authority (FINRA) issues a report on disciplinary and other actions involving registered brokers, investment advisers and brokerage firms every month. 

Here are significant Florida related actions for October 2012. Follow this link to the FINRA website for the entire report for actions nationwide for the month of October 2012 as well as to access  earlier time periods.


This month Variable Annuities seems to be the common theme in the Florida matters. These investments are subject to abuse since they generally offer the selling broker a commission substantially greater than most of the other options. 

You can access the employment, educational and disciplinary history of any broker by going to the FINRA Broker Check website which can be accessed here


Cobalt Capital, Inc.-Winter Park, FL– was censured and fined $15,000 and findings were entered that the firm failed to preserve all of its business-related electronic communications for about two years.

Credicorp Securities, Inc.-Coral Gables, FL– was censured and fined $10,000 and findings were entered that the firm failed to report transactions to TRACE and also incorrectly reported some transactions and that in 31 instances the firm failed to provide proper disclosure to customers. 

EFG Capital International, Corp.-Miami-FL– was censured and fined $32,500 and findings that the failed to report the correct contra-party identifier for transactions in TRACE eligible securities to TRACE and other violations related to TRACE.

Equity Station, Inc.-Boca Raton, FL– censured and fined $10,000 and findings entered that the firm conducted securities business while failing to maintain its required net minimum capital and that the firm booked transactions for which there was no economic substance or support and improperly classified a receivable. It was also found that the firm failed to file early warning notifications and filed inaccurate monthly FOCUS reports. 

Venecredit Securities, Inc.-Miami, FL– censured and fined $25,000 and FINRA found that for 2 years most of the firm’s retail business came from foreign finders who were employed by a related entity and that the firm did not adequately supervise the foreign finders. Deficiencies were also found as to the retention of electronic communications. 

vFinance Investments, Inc.-Boca Raton,FL-censured and fined $22,500 and findings that is sold corporate bonds to customers at a price that was not fair. The firm was also fined an additonal $25,000 for failing to maintain minimum net capital requirements, booking transactions for which there was no economic substance and other infractions.

Adam S. Deane- Naples, FL– censured and fined $25,000 and suspended for three months, with findings that Deane recommended and executed a variable annuity replacement in a state where he was not licensed to sell such a product. The findings also state that he included false information in the application. Suspension is from September 4, 2012-December 3, 2012. According to FINRA records, Deane is not currently registered. He last worked for Best Direct Securities, LLC in Bonita Springs. Prior to that he was with Merrill Lynch. 

Alice H. Everett-Hialeah, FL-submitted Offer of Settlement in which she was barred from association with any FINRA member in any capacity. Findings were entered that she failed to respond to FINRA requests for information regarding a private securities transaction and unsuitable investment recommendations. According to FINRA records, Everett is not currently registered and last worked for Allstate Financial Services in Sunny Isles, FL. Prior to that she worked for Intersecurities, Inc. in Hialeah.

Michael J Hester-Tampa, FL-barred by FINRA upon findings that he engaged in a private securities transaction by accepting $20,000 from individuals for the purchase of an investment without approval from his firm. Hester deposited the funds into a bank account controlled by him and converted them to his personal use. Hester is not currently registered with FINRA and last worked for International Assets Advisory in Orlando. Prior to that he was with Oppenheimer & Co. 

Alan B. Levin-Coral Springs, FL– fined $10,000 and suspended for 10 days for allowing his firm to conduct business while not capital deficient and while he was serving as FINOP. Levin is currently employed by VFinance Investments, Equity Station, Inc. and National Securities Corp. in Boca Raton, FL.

Edgar A Thomas-Winter Haven, FL-fined $5,000 and suspended for 10 days upon findings that he failed to supervise a broker who recommended variable annuity purchases and exchanges without reasonable basis to believe the customer was adequately apprised of the associated costs. Thomas is not currently registered and last worked for Brookstone Securities, Inc. in Lakeland, FL. Prior to that he was with J.W. Cole Financial. 

Kris M Thoresen-Ponte Vedra, FL-fined $10,000 and suspended for one year upon findings that he did not comply with firm guidelines with regard to the sale of variable annuities. The transactions had a value in excess of $1.2 million and some were resubmitted directly to the product sponsor after his firm had rejected them. Thoresen
is not currently registered and last worked for Allstate Financial Services in Jacksonville. 

Stephanie L Webster-Ft. Lauderdale, FL-fined $5,000 and suspended for 15 days upon findings that she trying to settle a customer complaint by paying $70,000, without notifying her current or previous member firm. Webster is not currently registered and last worked for Atlas One Financial Group in West Palm Beach, FL. Prior to that she was with Capital Guardian, LLC. 

Andrew M. Abern-Miami,FL-fined $25,000 and censured upon findings that he provided some customers with variable annuity expense disclosure forms containing inaccurate information. The proposed transaction was unsuitable since it contemplated using refinancing proceeds from the customers residence and was too high a concentration level. Abern is registered with Dalton Strategic Investment Services in Coral Gables, FL. 

Johan Mary-Lyn Akal-Sarasota, FL– named a respondent in a FINRA complaint alleging that she forged, without authority, a customers signature on withdrawal slips and took over $47,000 from the customers bank account. Akal is not currently registered. Her last registration was with Suntrust Investment Services in Sarasota, FL. 

Levinski D Barnes-Lutz, FL-named a respondent in a FINRA complaint that he misled a customer as to an outside investment, collected $50,000 from the customer and only returned a portion. Barnes is not currently registered. His last registration was with J.P. Turner & Company. 

If you have questions about losses or other activity in your brokerage account, please do not hesitate to contact us. We have been helping investors recover stock market losses for more than 20 years. 

Free consultation. Nationwide representation.


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Non-Traded REITs In FINRA Spotlight

Non exchange traded REITs were the focus of a speech given last week by FINRA’s Executive VP of Sales Practice Regulation, Susan F. Axelrod. Her remarks, which can be accessed here, were presented to the Securities Industry and Financial Markets Association’s (SIFMA)  Complex Product Forum in New York.


Since the beginning of the year, we have written extensively on the issues associated with non-traded REITs. Follow this link for those prior articles.  Non-traded REITs are publicly registered investments that are not traded on a national securities exchange, making them highly illiquid. If an investor needs or desires to liquidate the investment, there are very few alternatives and the investor can expect to suffer a hefty discount on whatever value the company has recently announced to the the fair market value. 

Behringer Harvard REIT , which sells at less than half its $10 offering price, was just hit with a class action last month. Other popular non-traded REITs whose values have dropped significantly in the past few years include: 
  • Retail Properties of America
  • Inland American
  • Wells REIT II
  • KBS REIT I
  • CNL Lifestyle Properties
  • Dividend Capital REIT
  • Hines REIT
Ms. Axlerod’s observations that FINRA examiners have found that investors are often confused about the features, fees and liquidity of these REITs coincides with what we have heard from many of our clients. These products were often sold as an alternative to bonds with the expectation that distributions would be from income (rather than debt), that the distributions would be continuous and that the value of the investment would remain stable. Most investors we have spoken to were unaware that these investments are quite illiquid.

Now many investors find themselves in a predicament since distributions have  ceased, the investment is worth a fraction of it’s purchase price and there is no ready market where it can be liquidated. 

Brokers owe a duty to investors to make suitable recommendations and to accurately and fully explain the risks associated with a proposed investment. If you have suffered losses in non traded REITs and believe that you were misled regarding the risks, you may be able to recover some or all of your losses. Contact us if you have questions.

Free consultation. 


561 391 1900

Behringer Harvard Suit May Lead to Class Action

Behringer Harvard REIT I, one of the largest nontraded real estate investment trusts with over $4 billion in assets, was recently sued in Federal Court in the Northern District of Texas by an investor who purchase 1,275 shares from 2004 to 2008. The suit, which also names Behringer Harvard Holdings, CEO Robert Aisner and other company executives, may lead to the formation of a class action. 

 
The complaint, which may be viewed here,  alleges that the company:  “sought to mask the poor performance by paying investors back with their own money, while at the same time draining the company of millions of dollars”  for Behringer Harvard and its executives.
 
Behringer Harvard has seen its value drop from its $10 per share offering price to a recent value, as estimated by the company itself, of $4.64. Since these investments are not traded on any conventional exchange, the actual amount an investor desiring to liquidate immediately can obtain is often 20-30% less than the company’s estimated value. For prior articles related to the secondary market for non traded REITs, go to this link
 
Nontraded REITs were sold to many retirees who believed that they were similar to bonds, that they would pay out income on a steady basis and that the original purchase price was not subject to such drastic decline. In addition, most investors were unaware of the fact that it may be difficult or impossible to liquidate the investments. 
 
While class actions may provide some relief for investors, in the case of these REIT investments, in most cases an investor will be likely to have better success with an individual arbitration filed with FINRA. For a discussion on class actions vs. arbitration, see here
 
If the risks associated with owning a nontraded REIT like Behringer Harvard were not adequately explained to you, pursuing an arbitration proceeding with FINRA may lead to the recovery of some or all of your investment losses. 
 
We have been helping investors recover stock market losses for more than 20 years. Please contact us if you have questions.
 
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