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

Behringer Harvard-Want to Sell Your Shares?

Cheap?
I mean really cheap.
According to the Investment News, there have recently been a couple of unsolicited tender offers for Behringer Harvard Short-Term Opportunity Fund I, a limited partnership and Behringer Harvard REIT I, Inc. a nontraded real estate investment trust.

Investors purchased most of the shares and units at $10.

In one minitender, Peachtree Partners is offering twelve, yes $.12, cents per share for the Short-Term Opportunity Fund I. In another, CMG Legacy Income Fund LLC is offering $1.80 per share for Behringer Harvard REIT I. Both of these offers are only a fraction of the fund’s most recently report valuations.

Behringer Harvard suspended their redemption program some time ago and investors needing liquidity have few options, if any, if they need to dispose of the investment to raise cash. A websearch for “REIT secondary market” will yield a number of companies who help investors dispose of illiquid investments not traded on exchanges.

Many investors purchased nontraded REITs with the belief that distributions would be consistent and unaware of the fact that no market existed should they need to dispose of the investment to raise cash. Stockbrokers have a duty to warn investors of risks and to make recommendations that are suitable.

If you have questions about the way your brokerage account is being handled or investment losses you have suffered, please do not hesitate to contact us.

Rex Securities Law , located in Boca Raton, FL, 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.

Rex Securities Law

561 391 1900

 

Exchange Traded Funds-Use Caution

Exchange-traded funds (ETFs) have become very popular over recent years and many investors are led to believe they are conservative and risk free.

This is not always the case.

An ETF is and investment that holds assets (stocks, bonds and/or commodities) which trades on stock exchanges, much like a stock. The fair market value is generally close to the net asset value of the investment it holds, at the end of each day. It is designed to combine the features of a mutual fund or unit investment trust.

Last year, the Florida Office of Financial Regulation (OFR) cautioned retail investors about ETFs. They stated in their release:

“While ETFs are often compared to mutual funds and marketed to investors seeking safe, stable investments, not all ETFs are the same. OFR’s advisory notes that some traditional ETFs may be appropriate for long-term holders, but others, including exotic leveraged and inverse ETFs, may require daily monitoring.”

ETF’s contain risks related to liquidity, fees and tax consequences that investors should understand before investing. Most importantly, if you are a retiree on fixed income, you need to understand whether the ETF your broker is suggesting is right for you and can you sell it quickly if you need cash?

UNG, USO and DBA are ETF’s that were designed to track the price of an underlying commodity, however have not succeded so well. Many brokers sold these investments without adequately disclosing risk issues. Direxion Funds, ProShares and Rydex also offered ETF’s that may not be suitable to retail investors, especially if you are retired.

If you have questions about the way your brokerage account is being handled or investment losses you have suffered, please do not hesitate to contact us .

Rex Securities Law , located in Boca Raton, FL, 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.

Rex Securities Law

561 391 1900

 

 

Brookstreet- Risky CMO’s Lead to $10MM Fine

The SEC’s case against the former CEO of Brookstreet Securities Corp., Stanley C. Brooks, has led to a fine of 10 million dollars. A federal judge recently entered this penalty, which was the maximum allowable, for selling risky mortgage-backed securities to investors whose goals were conservative.

Rex Securities Law represented a number of these victims. Most were retirees, living on fixed income who could ill afford to take the risks associated with these products. Unfortunately the brokers told the customers that the products were safe and secure and that they would provide steady income, at rates substantially higher than more traditional investments.

This is another case of If It Looks Too Good to be True, It Probably Is.

When the economy faltered, these illiquid & risky investments plummeted in value, millions were lost and the lives of thousands of retirees were altered drastically as they came to grips with the fact that they could no longer afford their living expenses.

Further misfortune ensued, when unable to provide restitution to the victims, the company collapsed.

Tragedy continued when Clifford Popper, one of Brookstreet’s local salesmen who was being sued by the SEC for his participation, committed suicide in 2011.

Moral of the story is to question any investment that is paying a return inordinately higher than the other conservative investments. Wall Street will continue to pump out these products despite regulatory attempts to stop it.

Currently we are seeing potential similar issues with REITs (Real Estate Investment Trusts) and CLO’s (collateralized loan obligations).

Rex Securities Law , located in Boca Raton, FL, 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.

Rex Securities Law

561 391 1900

 

Securities & Exchange Commission Warns Investors to be Wary of Unauthorized Trading In Stock Brokerage Accounts

The SEC recently released an alert telling brokers and investment advisers to pay closer attention to unauthorized trading in customer brokerage accounts.

In the risk alert issued by the nation’s top securities watchdog, the SEC says firms should watch for:

  • Changes in trading patterns
  • High volume of trade cancellations or corrections
  • Manual trade changes
  • Unexplained profits for a particular broker
  • Rogue trades
  • Trades that exceed risk tolerance for a particular client

Brokers, traders, assistants, portfolio managers, risk managers and advisers are all potential perpetrators. The alert went on to warn firms to review their supervisory procedures to determine if improvements could be made to address the concerns.

Over the years we have seen a multitude of cases involving retirees whose brokerage accounts were traded without their authority. Unless you have granted discretionary authority, which must be done in writing, to your broker, the broker is required to obtain your authority before buying or selling in your account.

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

Nationwide representation of victims of stockbroker fraud and the malpractice of investment professionals.

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