Finra files a complaint against DLA

David Lerner Associates Inc. has been accused of targeting unsophisticated seniors while selling real estate investment trust shares without considering whether the illiquid securities were suitable for its clients. The brokerage firm misled investors who bought more than $300 million of shares in the $2 billion Apple REIT Ten offering this year, the Financial Industry Regulatory Authority Inc. said last week in a disciplinary complaint posted on its website. The firm denies the allegations, according to a statement. In soliciting customers for Apple REIT Ten, the firm provided misleading information about distribution rates for a series of predecessor securities that now are closed to investors, Finra said. The firm has sold almost $6.8 billion of Apple REIT shares to more than 122,000 customers since 1992, according to Finra. Those sales have generated more than $600 million, accounting for more than 60% of the firm's business since 1996, Finra said. The complaint is the first step in a formal proceeding, Finra said. It isn't filed in court, and the firm can request a hearing before a disciplinary panel, the regulator said in its statement.

'DUE DILIGENCE'

“The firm conducted thorough due diligence of Apple REIT Ten's offering documents and audited financial statements,” David Lerner Associates said in its statement. “DLA will vigorously defend these claims. It looks forward to the opportunity to set the record straight and expects to be completely vindicated,” the firm said. In September, the firm paid a $255,000 fine for failing to provide required information in connection with the replacement of variable-life-insurance policies and annuity contracts from November 1998 through February 2004, according to the New York State Insurance Department. Last year, Finra accused the firm of overcharging customers on sales of municipal bonds and mortgage securities. That case is pending, according to Finra's brokerage records.