Category Archives: David Lerner and Associates Inc.

Allen B. Holeman-David Lerner Broker-Discloses Regulatory Complaint

July 2016- Syosset, NY

The FINRA records of Allen B. Holeman  , a stock broker who works for David Lerner Associates  , disclose  a currently pending regulatory matter and 2 outstanding judgement/liens

The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and disputes as well as regulatory sanctions. In addition brokers are required to disclose certain financial matters such as personal bankruptcies, judgments and liens.

In a currently pending FINRA Case # 2014043001601, FINRA alleges that Holeman willfully failed to timely amend FINRA records to disclose unsatisfied tax liens after there were imposed. The complaint alleges that Holeman also falsely completed his firm annual compliance questionnaire, thereby misleading the firm by attesting that there were no liens against him when he knew there were.

Holeman discloses 2 unsatisfied IRS tax liens in the amounts of $18,444.42 and $58,853.40.

Holeman has worked for David Lerner Associates since 11/2013. Prior to that he worked for Oppenheimer & Co.

If you have losses in an account handled by Allen B. Holeman , contact us to discuss your options.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

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

561 391 1900

Lerner’s Misleading Sales Tactics Cause FINRA to Issue Alert

FINRA reissued its Investor Alert on non-traded REITs as a result of the action filed by FINRA against David Lerner & Associates for failing to investigate the suitability of the investment and for marketing the REITs on its website using misleading returns.

According to the release, FINRA reissued the Alert:

“because of concern that
some investors may be the recipients of misleading information
regarding certain public non-traded REITS. Some investors may also
receive recommendations to purchase these products without adequate
investigation by the firm or individual broker to determine whether
these or similar investments are suitable.”

In their release , FINRA points out some of the same pitfalls of non-traded REITs we have been warning investors about for the past year, including:

  • shares do not trade on a national exchange
  •  the secondary market offers very limited liquidity and shares generally trade at a substantial discount
  • front end fees can be as high as 15% of each dollar invested
  • share prices can fluctuate, up or down

The share price of many non-traded REITs has dropped since the date of issue. In some cases the current value is less than half of the original purchase price. Given the state of the economy, and in particular, real estate, it is not likely that shares will recover to the original purchase price for many of these REITs. 

Couple with this the fact that many REITs have dramatically reduced or eliminated distributions and their lack of liquidity, those who purchased to supplement fixed income have a real problem. 

If you purchased a non-traded REIT based upon misrepresentations, you may be able to recover some or all of your losses. Contact us for further information.

Free consultation. Nationwide representation.

Rex Securities Law

561 391 1900

Do You Own Lerner Apple REIT Ten ? Read Why FINRA is Concerned, Part One.

In December 2011, the Financial Industry Regulatory Authority (FINRA) amended their complaint against the company David Lerner Associates, Inc. and added David Lerner, individually. That amended complaint contains information that should be of interest to anyone who owns any of the Lerner Apple REITs, and especially those owning Apple REIT Ten. The amended complaint can be accessed here.

Since the complaint is 58 pages long I will break this analysis into several separate posts. Here are highlights of the FINRA allegations that you should be aware of. Annotations are to the page number of the amended complaint:

  • Lerner continues to solicit thousands of customers to purchase Apple REIT Ten without performing adequate due diligence that there is reasonable basis to recommend the security to any customer..….and has sold the illiquid investment to unsophisticated and elderly customers. (Pages 1 & 2)
  • Through June 2011, Lerner marketed Apple Ten by using misleading results from Apple REITs Six, Seven, Eight & Nine, by misrepresenting the rate of return and the misleading investors into believing  distributions are income by using slide presentations that omit material information and present statements and claims that are misleading and exaggerated. (Pages 2&3)
  • Lerner , to counter negative press following the filing of the original FINRA complaint, sent out letters and conducted seminars regarding the performance , prospects, risks, a potential merger and the liquidity of the Apple REIT programs  that are exaggerated and misleading. (Pages 3&4)
  • The Apple REITs are illiquid and concentrated in one sub sector, extended stay hotels, however, many Lerner investors own two or more of the Apple REITs. Many of the investors are elderly and/or unsophisticated and were solicited by internet, radio, cold calls, mailings and seminars at senior centers, restaurants and country clubs. Nearly all  of Lerner’s sales are solicited. (Pages 7& 8)
  • The $11 share valuation for Apple REIT shares is currently inaccurate and has been inaccurate in the past. The valuation is incorrect due to market conditions , performance declines  and debt incurred by the REITs to fund distributions. Lerner did not take any of this economic reality into consideration and continued misleading investors by publishing the $11 a share value. (Pages 8-12)
  • Distributions from the Apple REITs have exceeded the REIT’s Net Income  by hundreds of millions per quarter. These distributions were funded by incurring debt and by returning some of the investors capital. While investors believed they were receiving income they were actually being handed back some of their own money, while the investment fell in value. (Pages 12-15)
  • Until June 2011, Lerner’s web advertising provided misleading figures for the performance of Apple REIT Six through Nine.  (page 17) Did you rely on this misinformation when purchasing Apple REIT Ten?
  • Since Mid-2011 sales of Apple REIT Ten have plummeted while investor requests to redeem shares have skyrocketed. In January 2011, Apple 10 sales were about 100,000,000. By October 2011, they had dropped to about $14 million. Redemption requests  for Apple Six, Seven, Eight and Nine for the the fourth quarter of 2010 were just over three million shares. By the third quarter of 2011, requests for redemption were nearly 50 million shares. Since there is a limit on the number of shares Lerner is obligated to redeem, only a small percentage of each series were actually redeemed. (Page 20) 

In a future post I will cover the highlights of the rest of the FINRA amended complaint against Lerner and his company.

Brokers have a duty to make suitable recommendations to investors and to provide accurate and complete information related to the risks and rewards of a particular investment. Many purchasers of Lerner Apple REITs were led to believe the investment would provide a safe haven for their nest eggs while generating regular and dependable income. If you have questions about the purchase of Lerner Apple REITs, or any other issue with your brokerage account, we may be able to help.

Call 561 391 1900 for a free consultation or contact us online.

Nationwide representation.

Rex Securities Law

David Lerner Fined $2.3 Million by FINRA

 

FINRA fined David Lerner Associates, the New York based brokerage firm recently in the headlines for the sale of the Apple REITs, $2.3 million. FINRA’s ruling, which can be accessed here,  resolves charges brought in May 2010 on claims that from 2005-2007, Lerner sold municipal bonds and collateralized mortgage obligations (CMO’s) at “unfairly high prices”, thereby reducing yields to investors.

Lerner was ordered to pay restitution of $1.4 million, plus interest, to affected customers.In addition, Lerner’s head trader William Mason was fined $200,000 and suspended from the industry for six months.

FINRA found that Lerner’s supervisory system for municipal bonds and CMO’s was inadequate and did not have adequate procedures for monitoring the fair pricing and time receipt of orders. The ruling took into consideration Lerner’s disciplinary history. After receiving a Letter of Caution from FINRA about the firm’s markup practices after a 2004 exam, and a Wells Notice on the same topic in 2009, Lerner continued its unfair pricing practice.

David Lerner & Associates as well as their namesake founder, David Lerner are both dealing with FINRA actions filed against them in 2011 in connection with the Apple REITs they sold about $6.8 billion worth to over 122,000 investors. For more information on those proceedings, see my prior post.

REITs, including Behringer Harvard, Inland Western, KBS, Wells, Hines, Cole Credit Property Trust & Cornerstone Core Properties have been in the headlines on nearly a daily basis recently. Many investors were sold non traded REITs with the promise of steady distributions of income and the ability to liquidate. Many REITs have ceased distributions, while values have plummeted and there is no market in which to liquidate, leaving investors hanging.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

 

Former David Lerner Officer Leaves to Start New Firm

March 21, 2012

The former chief compliance officer of David Lerner Associates, Inc. has formed a new firm, Cabot Lodge Securities, and has opened three offices in New York City and is opening a fourth in Boca Raton, FL.

Cabot has 20 advisers at the time, according to the Investment News, and plans to grow to 100 or 125 by the end of the year. Cabot promises a higher payout and an ownership interest in the firm. The firm will sell proprietary products like private placements, real estate programs, oil & gas programs as well as publicly traded and nontraded real estate investment trusts.

Albert Ackerman, Cabot’s CEO has extensive experience with Lerner. Lerner has sold over $6 billion of nontraded REITs to over 100,000 customers since 1992.

David Lerner and his company have recently been the subject of a FINRA investigation in connection with their REIT sales. More information on Lerner’s problems can be found here.  

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

FINRA Claims Lerner Tried to Coverup Apple REIT Results

On June 20, 2011, two class action suits were filed against David Lerner & Associates over its sales of Apple REITs, a family of real
estate-based securities. This follows a recently filed complaint by the Financial Industry Regulatory Authority (FINRA) alleging that David Lerner Associates, Inc. has been misleading investors about the value of the Apple REIT Ten shares. Here is a link to the  FINRA Press Release about the first regulatory action against Lerner.

Lerner’s company sold $6.8 billion of the securities into some 122,600 customer accounts. His company is a prominent advertiser on New York City radio, famous for its tagline, “Take a Tip from Poppy”, and in recent years has hosted seminars drawing hundreds of investors in the Boca Raton, FL area.

In December 2011, FINRA sued Lerner again, this time amending the prior complaint against Lerner’s company and this time naming him individually, for statements he made in an attempt to quell
anxious customers who had reason to be concerned about their investments since two class actions and a regulatory action were filed questioning the value of the investment. This second action claiming that Lerner misled investors about risk and valuation when marketing $2 billion in non-traded REITs also takes issue with Lerner’s attempt to continue to mislead investors. Here are some
of the highlights of the FINRA complaint against Lerner individually:

WHAT FINRA HAS TO SAY ABOUT LERNER’S RECENT CLAIMS ABOUT APPLE REITS:

  • Since Jan 2011, Lerner has sold $442 million of Apple REIT Ten, “without performing adequate due diligence in violation of its suitability obligations”
  • Earlier Apple REITs inappropriately valued REIT shares at a constant artificial price or $11, not withstanding years of performance declines, increased leverage and excessive return of capital to investors
  • Lerner continues to solicit thousands of customers to purchase Apple REIT  Ten without performing due diligence
  • The performance results for Apple REIT Six, Seven, Eight and Nine were misleading because they did not reflect reduction in distribution rates and did not disclose that income was insufficient to support the promised 7-8% returns and that distributions were partially funded by debt.
  • Between 4/28/2011 and 11/17/2011 Lerner made false, exaggerated and misleading claims regarding investment returns, market values, performance and prospects of the Apple REITs to over 1,000 customers during at least four investment seminars
  • Lerner made untrue and misleading statements regarding the prospects of Apple REIT Ten, calling it a cash cow
  • Lerner slide presentations to sell Apple REIT Ten violate FINRA’s advertising rules
  • On June 6 and July 27, 2011, to counter negative press following FINRA’s initial complaint against Lerner Associates, Lerner signed and sent out letters to over 50,000 Lerner customers that contained exaggerated, false, or misleading statements regarding the valuations, performance, prospects, risks, liquidity, and practices of the Apple REIT programs
  • Since July 13, 2011, Lerner continued to make unsupported claims regarding the merger of the Apple REITs into a company that will be publicly traded.
  • Although REITs Six through Nine are all illiquid and worth less than their $11 per share offering price, Lerner has led customers to believe the purported public offering will reap a windfall for investors

SO WHO DO YOU BELIEVE? FINRA OR LERNER?

Do you believe the regulators, who have no ax to grind other  than to
protect the investing public or do you believe the promoter, who
continues to promote?

Apparently Lerner’s PR campaign is succeeding because investors appear to have been swayed by his promises, notwithstanding the not so subtle warning that is coming from FINRA. We have yet to detect that investors are concerned by the FINRA allegations.

READ THE AMENDED FINRA COMPLAINT FOR YOURSELF AND DECIDE
The text of the complaint  filed by FINRA Department of Enforcement v David Lerner Associates, Inc. and David Lerner (CRD No. 307120) on December 13, 2011 can be accessed here.

Read it and make your own decision regarding what amount of concern to have if you own any of the Apple REITs.

Rex Securities Law , located in Boca Raton, FL, provides representation to  investors  in Texas and nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Rex Securities Law

561 391 1900