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Home > Blog > David Lerner Clients Get Somber News Over ‘Not Priced’ Apple REITs

David Lerner Clients Get Somber News Over ‘Not Priced’ Apple REITs

Clients of David Lerner Associates who own shares in non-traded REITs created by Apple REIT Cos. are not happy campers these days. When their account statements arrived in the mail last month, the value of their Apple REIT shares was designated as “not priced.”

The wording comes as a shock because for years shares of the non-traded REIT were listed at $11. As reported July 17 by Investment News, David Lerner continued to list the same price even after the Financial Industry Regulatory Authority (FINRA) instructed broker/dealers in 2009 to adjust prices on the investments more frequently.

Moreover, FINRA prohibited broker/dealers from using information more than 18 months old to estimate the value of a non-traded REIT.

FINRA filed a complaint against David Lerner in May, alleging that the firm has misled investors, as well as marketed unsuitable investment products to them.

In total, David Lerner has recommended and sold nearly $6.8 billion in Apple REIT shares since 1992, according to FINRA’s records.

A broker/dealer that switches a security’s value to “not priced” isn’t unheard of, but it is far from the norm, attorneys say.

“The price of $11 per share is most likely a misrepresentation of its true value, which is almost impossible to ascertain and price,” said Phil Aidikoff, a plaintiff’s attorney who has been following the David Lerner case but has no investors with the firm as clients in the Investment News article.

“Issues of pricing have been going on for a long time in the securities business,” Aidikoff said.

FINRAs complaint against David Lerner has sparked new concerns among broker/dealers about the sales of illiquid investments such as non-traded REITs and private placements.

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