Investors are suing David Lerner Associates, claiming the company acted negligently in the sale and underwriting of more than $6.8 billion in shares of Apple Real Estate Investment Trusts.
According to the complaint, Lerner allegedly misstated the business model of the REITs in question and misrepresented the value of shares and returns to investors.
As reported June 20 by Bloomberg, David Lerner has collected more than $600 million in fees and commissions over the past seven years while five Apple REITs have made more than $6 billion in proceeds. According to the story, the firm marketed the REITs as appropriate for conservative investors, stating they had never lost money by investing in hotels.
In reality, however, investors who acquired interests in the Apple REITs incurred substantial unrealized losses because their interests are now worth far less than the price paid to acquire them.
This isn’t the first time David Lerner Associates has faced legal issues. Last month, the Financial Industry Regulatory Authority (FINRA) accused the company of overcharging customers regarding sales of municipal bonds and mortgage securities. In 2004, Lerner was fined by the National Association of Securities Dealers over sales contests that promoted proprietary mutual funds and certain variable annuity and variable life insurance products.
Then, a year later, Lerner was fined for airing advertisements that exaggerated the brokerage’s investing record.
In 2006, Lerner was fined $400,000 for violating disclosure rules in the sale of variable life insurance and annuities. In each of the settlements, David Lerner neither admitted or denied any wrongdoing.