What should you know about David Lerner investments?


Quick Answer

In 2012, David Lerner Associates, an investment firm headquartered in Syosset, New York, was ordered by the Financial Industry Regulatory Authority to pay $12 million in restitution to its customers and a fine of more than $2.3 million. In addition, the firm's president and founder, David Lerner, was personally fined and received a three-year suspension from securities activities, according to FINRA.

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Full Answer

David Lerner Associates was disciplined by FINRA for unethical marketing practices and unfair price markups on financial products. The company engaged in a pattern of selling real estate investment trusts to elderly customers without disclosing that the trusts were inappropriate for retirement portfolios and sold municipal bonds and collateralized mortgage obligations at high prices. The firm's founder, David Lerner, was personally charged with making false claims. He was suspended from the securities industry for one year and from acting as a supervisor for two years, reports FINRA.

Following the sanctions, David Lerner Associates continued to successfully market REITs to elderly customers, according to a 2014 article in The Street. The investment trusts are attractive for producing income but do not have a large secondary market and are difficult to sell. This can create problems when customers who hold REITs in an individual retirement account reach age 70 1/2 and are required by law to begin withdrawing money from the IRA.

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