Florida Securities Fraud Lawyer Investigates Apple REIT Claims

Press release   •   Jun 08, 2011 03:20 EDT

TAMPA, FL – On 8.6.2011, the Financial Industry Regulatory Authority ("FINRA") filed an enforcement action against David Lerner Associates, Inc. ("DLA"), a broker/dealer with offices in New York, New Jersey, Connecticut, and Florida. In its enforcement complaint, FINRA alleges that since January, 2011, DLA has recommended and sold over $300 million of shares in Apple REIT Ten. The enforcement complaint alleges that DLA sold and continues to sell shares of Apple REIT Ten by targeting unsophisticated and elderly customers to buy the illiquid non-traded REIT shares.

According to the enforcement complaint, DLA acted as the best-efforts underwriter for all of the Apple REIT offerings. FINRA alleges that the offerings of the shares of Apple REIT Six through Nine were all completed at the price of $11 per share, despite a dramatic down turn in the commercial real estate, hotel, and hospitality markets; declines of net income in the REITs; increased leverage through borrowing; and the return of capital to investors through distributions. FINRA asserts that DLA knew or should have known that the $11 per share valuation was artificial and was a red flag which required DLA to conduct additional due diligence before recommending the purchase of Apple REIT Ten shares. The enforcement complaint explains that distributions were artificially maintained at 7% to 8% through the use of leverage and return of capital to investors for Apple REITs Six through Nine. For Apple REITs Six through Nine during the years 2009 and 2010, the total amount of distributions exceeded funds from opations, according to the complaint.

In summary, FINRA alleges that DLA knew or should have known that additional due diligence by it was necessary with respect to Apple REIT Ten for it to determine whether the shares of Apple REIT Ten passed the reasonable basis suitability test, or, in other words, were suitable for sale to any investor.

Based on the allegations made in the enforcement complaint filed by FINRA, investors who were sold shares in any of the Apple REITs Six through Ten by David Lerner Associates or any other broker/dealer may have legitimate claims to seek the rescission of their purchases or to recover their investment losses. If you are an investor who was sold shares of any of the Apple REITs Six through Ten, and you would like information concerning your legal rights, please contact Scott Ilgenfritz for a no cost and no obligation consultation.

The securities arbitration and litigation attorneys of Johnson, Pope, Bokor, Ruppel & Burns, LLP, represent investors across the nation who have been victims of the negligence or fraud of stockbrokers, broker/dealers, and investment advisors. The firm's securities arbitration and litigation attorneys have in excess of sixty years experience in representing institutional and individual investors nationwide, seeking to recover losses caused by the negligence or fraud of financial professionals and their firms.

About Scott C. Ilgenfritz

Since 1992, Scott Ilgenfritz has represented aggrieved investors as securities arbitration and litigation lawyer in Florida and other states. In 1997, he obtained The Florida Bar certification, Board Certified Business Litigation Specialist. He has achieved an AV® rating in the Martindale-Hubbell Law Directory – the highest peer-review rating of Martindale-Hubbell, for professional ability and adherence to professional standards of conduct and ethics, reliability, and diligence.

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