David Lerner Associates, Inc. Sanctioned $12 Million for Improper Sales Practices Concerning Apple REIT Ten

Bloomberg News is reporting that David Lerner Associates, Inc. (“DLA”) has been sanctioned by FINRA for “misleading investors into buying real estate investment trusts [REITs].”  The firm has underwritten $7 billion of Apple REITs.  According to FINRA,

DLA 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. To sell Apple REIT Ten, DLA also used misleading marketing materials that presented performance results for the closed Apple REITs without disclosing to customers that income from those REITs was insufficient to support the distributions to unit owners.

Also, FINRA fined DLA more than $2.3 million for “charging unfair prices on municipal bonds and collateralized mortgage obligations (CMOs) it sold over a 30 month period, and for related supervisory violations.”

FINRA also sanctioned Head Trader, William Mason, and suspended him for six months from the securities industry “for his role in charging excessive muni and CMO markups.”

Dept’ of Enforcment v. David Lerner Associates, Inc. and David Lerner, No. 2009020741901 (Oct. 22, 2012).