David Lerner Associates Inc., a brokerage firm known for its founder's “Take a tip from Poppy” advertising slogan, was accused by the
Financial Industry Regulatory Authority of overcharging customers on sales of municipal bonds and mortgage securities.
William Mason, the Syosset, New York-based broker's head trader, was also accused of overcharging in the May 7 complaint. He and the firm made investors pay “excessive markups” of as much as 5.78 percent on more than 1,500 municipal bond transactions and as much as 12.81 percent on more than 1,800 sales of mortgage securities from 2005 and 2007, Finra said.
“Because of the excessive markups, David Lerner Associates customers received yields that were lower than they would have obtained had the markups been fair and reasonable,” the self- regulatory group said in the complaint. “Mason, himself the head trader, was responsible for setting or approving all prices for municipal bonds, but failed to ensure that such prices were fair.”
“The firm vigorously denies Finra's allegations, believes its claims to be unfounded, and expects to be completely vindicated upon the conclusion of this process,” Lawrence Aarons, a spokesman for David Lerner Associates, said in an e- mail statement.
“The evidence will demonstrate that our prices have been significantly lower than the prices courts have traditionally found to be fair and reasonable,” Aarons said.
Mason declined to comment, Aarons said.
Mason and the firm can file responses within 31 days, said Finra spokesman Brendan Intindola. The authority regulates about 4,700 brokerage firms and 635,000 registered securities representatives.
David Lerner Associates was fined by the National Association of Securities Dealers in 2004 for sales contests that promoted proprietary mutual funds and certain variable annuity and variable life insurance products. A year later the brokerage was fined for airing advertisements that exaggerated the firm's investing record.
The firm also was fined $400,000 in 2006 for violating disclosure rules in the sale of variable life insurance and annuities. David Lerner Associates didn't admit or deny wrongdoing in any of the settlements.
Mason, who holds a degree from New York's Brooklyn College, entered the securities industry in 1983 and was hired by David Lerner in 1988, according to Finra. Lerner was teaching history and economics at Bayside High School in Queens, New York, before founding the brokerage, according to the firm's website.
The New York Post reported the charges on Tuesday on its website.
