How older investors can fend off fraud
David Lerner Associates is in hot water with regulators - and elderly investors have been caught up in the turmoil. So, here are some tips for older investors, or someone in your family who might be a target for an elder-scamming investment fraud.
David Lerner Associates is in hot water with regulators - and elderly investors have been caught up in the turmoil. So, here are some tips for older investors, or someone in your family who might be a target for an elder-scamming investment fraud.
David Lerner Associates is a brokerage firm that employs about 250 registered representatives and has branch offices in New Jersey and Florida. Founded by David Lerner, the company president, the firm is a full-service broker/dealer with a disciplinary history well-documented on the securities website of the watchdog Financial Industry Regulatory Agency (FINRA).
Lerner has for years promised "returns of 10 percent and more" to "tens of thousands" of customers via radio and seminars. Specifically, he said: "For 25 years, we at David Lerner Associates have provided tens of thousands of people with investments that, even in these turbulent times, continue to pay over 10 percent." He doesn't provide any facts to back up that claim.
And by the way, David Lerner Associates is by no means alone in hawking investments that are not always in the best interest of older folks. But DLA has been in the news recently regarding its relationship with those investors.
The firm heavily marketed Apple REITs, a real estate investment trust that invested in legitimate hotel properties. DLA failed to tell investors that the REIT funds, for instance, had limited redemptions and didn't trade in a public market, according to a suit filed this month by FINRA.
David Lerner himself and another executive were personally fined (Lerner for $25,000) in 2005 for misleading sales tactics.
Unfortunately, quite a few elderly investors are emerging as investors with David Lerner Associates. One reason is, senior-age investors are attracted to the dividends - and steady income - that the investments promise.
Federal regulators are charging that, since January 2011, David Lerner Associates sold a $2 billion real estate investment trust - Apple REIT Ten - "targeting unsophisticated and elderly customers to buy the illiquid security."
There are excellent resources for senior citizens who are considering investing.
The new "Older Americans and Investment Fraud" section of the nonprofit Alliance for Investors Education's website features a Top 10 of resources available to consumers for spotting and protecting themselves from investment fraud. A full report of the Alliance's new "Older Americans & Investment Fraud: Protecting Yourself, Protecting Your Loved Ones" is available here.
An elderly investor - or anyone else, for that matter - should ask the following questions before investing:
What are the risks of this investment? How much does it cost initially to purchase? What, if any, additional or ongoing costs will I have to pay?
How liquid is this investment? If I need to sell or cash in the investment, how readily can I do so? Will my investment be tied up for a period of time? If so, for how long?
What happens if I decide to sell or cash in my investment? Are there surrender charges? Other fees? For what type of investor is this investment a good idea? For what type of investor is this investment a bad idea?
Naturally, you can always start with regulators. FINRA's handy BrokerCheck allows you to punch in the name of any individual broker or brokerage company you'd like to check out for regulatory or disciplinary problems before going into business with them. It's invaluable as a background check for anyone in the industry. Or you can call FINRA at 1-800-289-9999.
Help the people you care about - before they get scammed.
Click here for more coverage of financial fraud against the elderly, as well as places to turn if you suspect that you have been victimized.EndText