FINRA Files Complaint Against DLA For ILLIQUID Apple REITS

The Financial Industry Regulatory Authority (“FINRA”) recently filed a complaint against David Lerner & Associates (“DLA”) for soliciting its customers to invest in illiquid real estate investment trusts (“REITs”) known as Apple REITs. The Complaint, filed in May 2011, alleges that DLA solicited investors to purchase shares of Apple REIT Ten without conducting due diligence to determine whether the investment was suitable for investors. FINRA charges DLA with targeting unsophisticated and elderly investors.

According to the Complaint, the value of the Apple REITs have remained at a constant share price of $11. This share price has not changed despite a decline in performance and increased leverage. DLA is the sole distributor for these Apple REITs, and it did not question these steady valuations even though there was a significant downturn in the commercial real estate market.

FINRA alleges that DLA has sold approximately $6.8 billion of Apple REITs. Over 122,000 customers have purchased shares of Apple REITs since 1992, generating more than $600 million to DLA. This accounts for over 60% of DLA’s business.

We at Heimanson & Wolf, LLP routinely represent investors in cases involving investment fraud. We seek to hold investment advisors accountable for soliciting the sale of unsuitable investments to investors.