New York investment advisor disciplined over REIT deals

TRD New York /
Jun.June 03, 2011 04:21 PM

The Financial Industry Regulatory Authority has filed a disciplinary action against brokerage David Lerner Associates for allegedly misleading investors in selling… [shares of Apple REIT Eight],” a real estate investment trust facing significant problems, according to the New York Times.

The REIT has failed to make mortgage payments on four of its hotels and may have to surrender them to lenders. It has made monthly payments to investors, but much of the money was borrowed. The last loan the company was granted was secured by the personal assets of the trust’s chief executive.

Yet, the investors have no idea, the New York Times said. Every month, David Lerner, who advertises heavily in New York and Florida, sends out statements showing the value of shares at $11 each, exactly what most of them sold for.

Only a day after the disciplinary action was filed, an investment management company made an offer for up to 5 percent of the outstanding shares, for $3 apiece.

Lerner called the complaint “baseless” and “rife with falsehoods, distortions and misleading statements.”

He then went on to reference the Bernie Madoff scheme. “What is obvious,” he said, “is that [David Lerner Associates] and other small firms have become the scapegoats for FINRA’s utter failure to address Madoff’s fraudulent scheme.” [NYT]


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