David Lerner Associates (DLA) has been accused of investment fraud. DLA has been accused of selling illiquid real estate investment trust shares to unsophisticated and elderly investors without taking into account whether the investments were suitable for them.
According to the Financial Industry Regulatory Authority (FINRA), the Syosset, New York-based brokerage firm misled individuals who invested in the $2 billion Apple REIT Ten offering. The unsuspecting investors purchased more than $300 million of shares in the REIT.
DLA allegedly provided misleading information about distribution rates for a series of predecessor securities to investors. FINRA claims that the figures provided did not show that the distributions far exceeded income and that the distributions were funded by debt that increased leverage in the REITs.
In a statement, DLA has denied the FINRA allegations.
According to FINRA, DLA has sold nearly $6.8 billion of Apple REIT shares to more than 122,000 investors since 1992. Since 1996, DLA has generated over $600 million from those sales, accounting for approximately 60 percent of DLA’s business.
