As shown by this FINRA Order, FINRA sanctioned David Lerner and Associates for sales of Apple REIT Ten and markups related to municipal bonds and CMO’s. Of the $14 million in fines and restitution, approximately $12 million is to be paid to affected customers.
The wrongful conduct alleged by FINRA includes the following: 1) failure to do proper due diligence on Apple REIT Ten prior to approving its sale to customers, many of whom were elderly and unsophisticated, 2) misrepresentations of the REITs performance, value, and returns, 3) false statements in sales seminars and letters describing the REITs, 4) improper markups, and 5) supervisory violations.
David Lerner Associates has had a great incentive for the sale of the Apple REITs - it earns 10% on every sale and has sold $7 billion of the REITs since 1996. These revenues account for 60-70% of DLA’s business according to FINRA. As stated by FINRA: “Many of DLAs customers are senior and/or unsophisticated, and DLA solicits customers by general means such as the internet, radio, cold callings, mailings, and open-invitation seminars at senior centers, restaurants, and country clubs.”
Details of the restitution program may be found here. As stated, the remediation plan does not prevent investors from pursuing additional losses through arbitration. If you suffered losses in REITs and you would like to discuss your case for free with one of our attorneys, please contact Greco & Greco.