Posts tagged ‘Apple REIT losses’
FINRA fines David Lerner over Apple REIT sales.
The Financial Industry Regulatory Authority Inc. recently announced that it has ordered David Lerner & Associates to pay $12 million in restitution to clients who bought shares of a nontraded real estate investment trust known as Apple REIT 10. Finra also fined David Lerner Associates more than $2.3 million for charging unfair prices on municipal bonds and collateralized mortgage obligations.
In addition, the Syosset, N.Y.-based firm’s founder and chief executive, David Lerner, was fined $250,000 and suspended from the securities industry for one year, followed by a two-year suspension from acting as a firm’s principal.
David Lerner Associates and Mr. Lerner neither admitted nor denied the charges around the sale of the products but consented to the entry of Finra’s findings, the regulator said in a statement issued Monday morning.
David Lerner Associates has been a longtime seller of nontraded REITs, which do not trade on exchanges but rather are held by investors for a number of years and collect dividends over the investments’ lifetime. Over the past 20 years, the firm sold roughly $7 billion of Apple REITs.
The fine and restitution put to bed two long-running Finra investigations into the firm, which has 190 registered reps and six branches in the New York tri-state area and Florida. The brokerage is noted for its radio ads which ask listeners to “Take a tip from Poppy.”
The first action against the firm stemmed from a 2011 Finra complaint. Finra alleged that the firm engaged in improper sales practices of the $2 billion Apple REIT 10. Between January and December 2011, David Lerner Associates allegedly recommended and sold more than $442 million of Apple REIT 10 without performing adequate due diligence in violation of its suitability obligations. The firm has been the lone seller of the series of Apple REITs, which invest primarily in two national chains of extended-stay hotels.
In 2010, Finra alleged that Lerner charged excessive markups and/or otherwise failed to meet its obligation to provide a fair and reasonable price at the time of the transaction on thousands of municipal bond transactions.
The White Law Group has been investigating these same actions for more than a year and continues to advise investors on their litigation options.
If you purchased Apple REITs from David Lerner and are interested in exploring your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
First of Many Arbitration Awards Against David Lerner?
It is being reported that the first of potentially hundreds of arbitration cases relating to the sale of Apple REITS by David Lerner Associates Inc. has been decided in favor of claimants Joseph Graziose and Florence Hechtel.
Last week, Financial Industry Regulatory Authority Inc. arbitrator Alvin Green apparently ordered the firm to pay the two individuals $24,450 after they return their shares of Apple REIT Nine to the firm. (Apple REIT Nine is the fourteenth largest nontraded REIT in the U.S. In addition to Apple REIT Nine, arbitration claims have been filed involving Apple REIT Six, Apple REIT Seven, and Apple REIT Eight).
The Finra arbitrator’s decision could be an ominous sign given potentially hundreds of other claims already filed or likely to be filed against the firm over the Apple REIT investments. (According to Finra, Mr. Lerner’s firm has sold nearly $7 billion worth of the Apple real estate trusts since 1992.)
The White Law Group continues to advise Apple REIT investors on their litigation options. At this point, this much appears known:
(1) In May 2011, FINRA launched an investigation into David Lerner’s sales practices with respect to Apple REITs;
(2) In June 2011, multiple class actions were filed against David Lerner and Apple REIT raising similar allegations as those raised by FINRA;
(3) David Lerner recently changed the way Apple REITs are valued on their account statements – stating only that the REITs are “unpriced,” and acknowledging for the first time that the value may not be what the investor paid for the shares;
(4) Those that requested a redemption prior to June 30, 2011 (the last quarterly deadline to request a redemption) were told that only a partial redemption would be possible;
(5) The only known offer to purchase Apple REIT shares is at $3/share and the alleged book value is approximately $7/share (meaning that the actual value of the Apple REITs is likely between $5-7/share).
If you are an Apple REIT investor interested in learning about your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on the firm, visit http://www.whitesecuritieslaw.com.
David Lerner in more trouble over Apple REITs
It is being reported that FINRA recently filed an enforcement complaint against David Lerner individually for allegedly misleading investors about risk and valuation when marketing a $2 billion non-traded real estate investment, Apple REIT (the same investment for which FINRA began a similar proceeding against David Lerner’s brokerage firm, David Lerner & Associates Inc., this summer).
FINRA disclosed the allegations on Lerner’s personal BrokerCheck report, a public regulatory filing, on Jan 13.
As we have previously discussed, FINRA, in May, alleged that David Lerner & Associates did not perform “adequate due diligence” to determine whether Apple REIT investments were appropriate for its investors. FINRA also alleged that David Lerner & Associates management “inappropriately valued the REITs’ shares at a constant artificial price” despite years of real estate market fluctuations.
According to the reports, FINRA’s recent complaint against David Lerner individually stems from statements he made to investors in the wake of the regulator’s action against his firm..
David Lerner sent letters to more than 50,000 customers in July to “counter negative press” about the action and to attempt to quell people’s concerns about their Apple REIT investments. The letter also discussed a possible opportunity for Apple REIT shareholders to participate in a sale or listing on a national exchange to dispose of their shares at a reasonable price.
FINRA has also alleged that David Lerner made misleading, exaggerated statements to investors at a seminar his brokerage firm hosted, including that closed REITs are a potential “gold mine.”
The recent allegations raised by FINRA continue to shine a light on the issues raised by FINRA’s complaint in May. At this point, this much is known:
(1) In May 2011, FINRA launched its investigation into David Lerner’s sales practices with respect to Apple REITs;
(2) In June 2011, multiple class actions were filed against David Lerner and Apple REIT raising similar allegations as those raised by FINRA;
(3) David Lerner recently changed the way Apple REITs are valued on their account statements – stating only that the REITs are “unpriced,” and acknowledging for the first time that the value may not be what the investor paid for the shares;
(4) Those individuals that have requested redemptions since the announcement of the FINRA investigation have been told that only a partial redemption would be possible;
(5) The only known offer to purchase Apple REIT shares is at $3/share and the alleged book value is approximately $7/share (depending on which Apple REIT the investor owns).
Based on the foregoing, The White Law Group continues to investigate claims against David Lerner for fraud, negligence, negligent supervision, and breach of fiduciary duty. These claims are based on (1) David Lerner’s failure to perform the necessary due diligence on the Apple REITs prior to offering them for sale to investors, (2) its failure to adequately disclose the relationship between the firm and Apple REIT; (3) its failure to disclose the decline in value of the previous Apple REITs sold to investors when offering Apple REIT 9 and Apple REIT 10 to investors; and (4) the unsuitability of a non-traded REIT for certain investors (retirees, investors interested in liquidity and/or investors adverse to risk).
It is our belief that as additional information comes out regarding the Apple REIT investments (like FINRA’s investigation of David Lerner individually) that more and more people will realize that they have claims against David Lerner. This will not only likely depress the value of the Apple REIT shares further but may also impact the ultimate collectability of David Lerner & Associates. Accordingly, we are encouraging investors that would like to pursue their claims against David Lerner to contact us as soon as possible to discuss their legal rights.
To speak with a securities attorney, please call The White Law Group’s Chicago office at 312/238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
Investigation into potential for recovery of David Lerner and Apple REIT investment losses (Update)
The White Law Group is continuing to investigate and analyze how investors have been sold the Apple series of REITs by David Lerner Associates, Inc. The firm has spent the last few months reviewing documents and information regarding the Apple REIT investments sold by David Lerner and determining how best to assist investors in recovering losses incurred as a result of their investing in Apple REIT.
Here is a recap of the major points that our investigation has uncovered:
(1) In May 2011, FINRA launched an investigation into David Lerner’s sales practices with respect to Apple REITs;
(2) In June 2011, multiple class actions were filed against David Lerner and Apple REIT raising similar allegations as those raised by FINRA;
(3) David Lerner recently changed the way Apple REITs are valued on their account statements – stating only that the REITs are “unpriced,” and acknowledging for the first time that the value may not be what the investor paid for the shares;
(4) Apple REIT investors have received offers of $3/share and the alleged book value of certain Apple REITs is approximately $7/share.
FINRA has paid particularly close attention to its regulations with regards to non-traded REITs since they initially launched their investigation into David Lerner’s sales practices in May. They have recently discussed and proposed changes in regulations revolving around the valuation of non-traded REITs and also how the price of the shares are to be listed on customer account statements.
Additionally, Bruce Kelly of the investmentnews.com in a recent article states, “An eye-opening analysis of the “distributions” of nontraded REITs sold exclusively by David Lerner Associates Inc. shows the REIT’s property investments largely underperformed the level required to pay promised dividends to investors. Indeed, the analysis claims that the REITs consistently borrowed from a line of credit and used distributions investors were recycling back into the real estate investment trust to meet the targeted dividend payout.”
The analysis mentioned above by the investmentnews.com is based on an amended class action complaint filed by investors recently in New Jersey federal court. The original class complaint was filed in June. The complaint alleges that “…the distribution paid to investors did not match the level of income generated from the various Apple REITs…” and that “Brokers at David Lerner allegedly told clients that the Apple REITs were safe conservative investments that would protect their savings from the volatility of the stock market.”
The complaint reportedly further alleges that David Lerner Associates and the other named defendants, “paid distributions without regard to profitability, even as they acquired properties at prices they knew could not conceivably justify the level of distributions they were paying.”
Based on the foregoing, The White Law Group is reviewing claims against David Lerner on behalf of investors in Apple REIT for fraud, negligence, negligent supervision, and breach of fiduciary duty. These claims are based on (1) David Lerner’s alleged failure to perform the necessary due diligence on the Apple REITs prior to offering them for sale to investors, (2) its alleged failure to adequately disclose the relationship between the firm and Apple REIT; (3) its alleged failure to disclose the decline in value of the previous Apple REITs sold to investors when offering Apple REIT 9 and Apple REIT 10 to investors; and (4) the alleged unsuitability of a non-traded REIT for certain investors (including retirees, investors interested in liquidity, and investors adverse to risk).
To determine whether you may be able to recover investment losses incurred as a result of your purchase of an Apple REIT, please contact The White Law Group at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.
FINRA Proposal to Insist on Faster Valuations of Non-traded REITs
According to the investmentnews.com, FINRA “is putting the finishing touches on a rule proposal that would shorten the amount of time that broker-dealers have to come up with estimated valuation of a nontraded REIT.”
The Financial Industry Regulatory Authority (FINRA) has been paying very close attention to REIT investments over the past year. This upcoming proposal seems a natural progression following the complaint FINRA filed in May related to the Apple Real Estate Investment Trusts and David Lerner Associates, Inc. The regulatory agency’s complaint stated “that the longtime $11 a share value of Apple real estate investment trusts was unreasonable in the face of market fluctuations and other events.”
The problem currently is that “At the moment, nontraded REITs have a lengthy grace period to be valued at par before establishing an estimated market value.” During that period, the par value (value paid for the shares) is listed on statements and not the current market value of their investment. According to the investmentnews.com, “REIT sponsors commonly extend the offering period to sell more shares to investors, pushing the deadline for an updated market valuation.” During this time, which may be as long as 4 or 5 years, investors are largely in the dark about the true value of their investment in the Non-traded REIT.
Sources indicate that the new FINRA rule proposal will significantly reduce the amount of time that a Non-traded REIT can continue to show par value on customer statements and continue to sell shares at that price to new investors.
The White Law Group is currently representing investors in many claims involving non-traded REITs. The firm is currently investigating the manner in which brokerage firms have sold non-traded REITs.
If you are concerned about your investment, the securities attorneys of The White Law Group may be able to help. For a free consultation, please call the firm’s Chicago office at 312/238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.