Brokerage Firm Review: David Lerner Associates, Inc.

David Lerner Associates, Inc. (“David Lerner Associates”) (CRD#5397) has many different complaints filed by FINRA (Financial Industry Regulatory Authority), state regulatory organizations, and investors such as yourself. At the Law Offices of Robert Wayne Pearce, we have investigated David Lerner Associates, its regulatory and customer complaints, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.

If you believe you have a claim against David Lerner Associates, you should strongly consider hiring an investment fraud lawyer. You should not wait until it’s too late to file a claim. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Can I Sue David Lerner Associates?

If you’ve lost money caused by David Lerner Associates and/or its employees’ misconduct then the answer is, YES, you can sue David Lerner Associates, but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding. Attorney Robert Wayne Pearce has over 40 years of personal experience in FINRA arbitration proceedings and knows very well how you can not only sue David Lerner Associates in FINRA arbitration proceedings but WIN that arbitration. The easiest way to know if you have a viable case against David Lerner Associates is to call Attorney Pearce at our office at 800-732-2889.

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

What is David Lerner Associates?

David Lerner Associates (CRD#5397) is a registered broker-dealer. It operates as a full-service independent broker-dealer, providing a range of financial products and services to individual investors and financial advisors.

As a registered broker-dealer, David Lerner Associates is subject to regulations and oversight by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). It is required to comply with industry standards and regulations to ensure the protection of its clients’ interests.

A failure to comply with industry standards by either its brokers or the firm itself can result in disciplinary actions, fines, or other penalties imposed by regulatory authorities.

David Lerner Associates Has Many Different Regulatory Problems 

David Lerner Associates’ rapid growth has not been without consequences. There have been approximately 21 state and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) and the North American Securities Administrators Association (NASAA) for a violation(s) of investment-related rules or regulations. In addition, there have been many customer complaints filed against David Lerner Associates for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record. 

We have reported and written about these regulatory problems and customer complaints over many years. David Lerner Associates is a repeat offender: there are over 21 FINRA-reported proceedings citing the firm with one form of supervisory lapses or another.

A Brief Overview of Some of the Regulatory Problems David Lerner Associates Has Faced Over the Years*

David Lerner Associates has been repeatedly censured, warned, and fined multi-millions of dollars for its own misconduct and failure to supervise its army of financial advisors.*  A few of the notable FINRA Sanctions for its Supervisory Failures are below:

FINRA Censures and Fines David Lerner and Associates for Failure to Timely File Registration Form Amendments

Brief Overview: Without admitting or denying the findings, David Lerner and Associates consented to the sanctions and entry of findings that it failed to timely file amendments to Forms U4 and U5 that the firm submitted to FINRA. FINRA stated that the firm was informed of filing deficiencies by FINRA, but it continued to submit Form U4 and U5 amendments are non-timely basis. Additionally, the firm completely failed to file form U4 amendments to disclose four written customer complaints, alleging sales practice violations, and failed to timely file initial Form U5s to report of terminations of registered representatives. FINRA also found that the firm lacked procedures for supervising Form U4 and U5 amendments regarding customer arbitrations against the firm were submitted on a timely basis. As a result, the firm was fined $75,000.

New Jersey Bureau of Securities Fined David Lerner and Associates for Failure to Compliance Governing REITs

Brief Overview: The New Jersey Bureau of Securities initiated an investigation into David Lerner, and associates that revealed that the firm did not follow its own compliance requirements for the sale of non-traded real estate investment trusts. According to the Bureau, the firm sold three Apple REITs in violation of prospectus suitability standards. In addition, firm supervisors, approved the sales of the three Apple REITs to investors who did not satisfy suitability standards. Further, the firm violated numerous books and records requirements in connection with such REITs. As a result, the firm was fined $700,000.

FINRA Fines David Lerner and Associates for Failure to Conduct Adequate Due Diligence of REITs Before Sales to Customers

Brief Overview: Without admitting or denying the allegations, David Lerner and Associates consented to the described sanctions and to the entry of findings that it sold over $442 million of a $2 billion real estate investment trust without performing adequate due diligence. According to FINRA, the firm failed to conduct adequate due diligence to fulfill its reasonable basis suitability obligations despite the red flags as the sole issuer of the REIT. FINRA said the firm should’ve been aware of the red flags, including that management of the REIT may adopt improper valuation practice and may reasonably leverage that REIT in order to continue to issue returns unsupported by the REIT’s performance. Per FINRA, adequate due diligence includes understanding the potential risks and rewards of the REIT before recommending the security to customers. As a result, the firm was fined $14,000,000.

NASD Censures and Fines David Lerner and Associates for Failure to Adequately Disclose Risks Associated with REITs in its Advertisements

Brief Overview: The NASD initiated an investigation into David Lerner and Associates that revealed the firm made misleading statements and promoted real estate investment trusts at their seminars but failed to adequately disclosed limitations on redemptions program and the lack of secondary market liquidity. According to the NASD, the firm omitted information necessary to evaluate claims made and failed to disclose risks associated with the investment. Further, the firm printed advertisements in newspapers that contained language for which the firm did not have factual support or omitted information necessary to evaluate the claims made. Moreover, the NASD found the firm failed to provide written approval before using advertising and sales literature other than radio ads and failed to implement and enforce written procedures to ensure compliance with NASD Rule 2210. As a result, the firm was fined $115,000.

NASD Censured and Fines David Lerner and Associates for Sales Contest Favoring Proprietary Products

Brief Overview: Without admitting or denying the allegations, David Lerner and Associates consented to the sanctions and entry of NASD findings that the firm conducted sales contest in which the firm made payments are offers of non-cash compensation to its registered representative and associated persons for sales contests not based on the total production of the representatives and associated persons with respect to all mutual funds or variable contracts distributed or offered by the firm. According to the NASD, the credit received for sales of each mutual fund or variable contract were not equally weighted and often excluded non-proprietary funds or gave certain mutual funds or variable contracts greater weight for the contest. The NASD also found that the firm failed to establish and maintain its system to supervise the activities of each register representative and associated person reasonably designed to achieve compliance with NASD Rules. As a result, the firm was fined $100,000.

Why Does David Lerner Associates Have So Many Regulatory Problems And Customer Complaints?

Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of many franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.

The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers. 

Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.

These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.

Did David Lerner Associates Advisor Misconduct Cause You Investment Losses?

When financial advisor misconduct has caused you to lose substantial value to your investment accounts, you have the right to seek reimbursement from the responsible parties. David Lerner Associates is responsible like any employer for its financial advisors acts and omissions. In addition, it has an independent duty to supervise its stockbrokers and investment advisors. These cases can be extremely complex, and so having the support of a reputable attorney who is experienced in recovering investment losses for investors is key to your success. Many customers make the mistake of contacting David Lerner Associates without representation with an attorney about their complaints and have their complaints denied.

Related Read: Can You Sue Your Brokerage Firm?

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

Consult With An Attorney Who Recovers Investment Losses Caused By David Lerner Associates Today!

The investment loss attorneys at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 40 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with David Lerner Associates cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.

Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.

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