[Fredslist] David Lerner Associates Misled Investors in REIT, Finra Says

[Lucas Meyer]

Dear Gotham Tribe,

A while back, there was a discussion on Fredslist, in which Michael
Appel and I (and others) participated, which discussed the issue below;
we all concluded that it was a very bad deal for investors.  Proves the
point of caveat emptor once again.



David Lerner Associates Misled Investors in REIT, Finra Says
2011-05-31 18:06:41.524 GMT


By Joshua Gallu
     May 31 (Bloomberg) -- David Lerner Associates Inc. has been
accused of targeting unsophisticated and elderly customers while
selling real estate investment trust shares without considering
whether the illiquid security was suitable for its clients.
     The Syosset, New York-based brokerage, known for its "Take
a tip from Poppy" advertising slogan, misled investors who
bought more than $300 million of shares in the $2 billion Apple
REIT Ten offering this year, the Financial Industry Regulatory
Authority said today in a disciplinary complaint on its website.
     In soliciting customers for Apple REIT Ten, Lerner provided
misleading information about distribution rates for a series of
predecessor securities that are now closed to investors, Finra
said. The figures failed to show that distributions far exceeded
income and were funded by debt that leveraged the REITs, which
invest in extended-stay hotel properties, the regulator said.
     Lerner has sold almost $6.8 billion of Apple REIT shares to
more than 122,000 customers since 1992, according to Finra, the
industry-funded regulator for U.S. brokerages. Those sales have
generated more than $600 million, accounting for more than 60
percent of the firm's business since 1996, Finra said.
     The complaint is the first step in a formal proceeding,
Finra said today. It isn't filed in court, and the firm can
request a hearing before a disciplinary panel, the regulator
said in its statement.
     A phone call for comment to spokesman Lawrence Aarons
wasn't immediately returned.