Darwin or Dodo? Non-Traded REITs Will Reform or Perish

Do you want a safe "middle of the road" investment that isn't affected by ups and downs on Wall Street? Do you want 7-8% dividends? Do you want the peace of mind that comes from putting your hard-earned cash in a proven investment featuring years and years and years of stable stock prices and returns? Then you need to invest in non-traded REITs right now! Variations of this "too good to be true" sales pitch have been the sales siren for many of the non-traded Real Estate Investment Trusts sold domestically to thousands of elder investors seeking steady income in an unprecedented low interest rate environment.

FINRA has focused enforcement efforts on deceptive sales of these illiquid shares, charging Long Island-based brokerage David Lerner Associates (DLA) (CRD #5397), and its namesake CEO (CRD #307120), in a highly publicized 2011 enforcement action with misconduct related to its sales of allegedly unsuitable "Apple" (no, not that Apple) non-traded REIT shares. A FINRA arbitrator awarded equitable rescission relief to a pair of Apple REIT shareholders, enabling them tender the stock and be refunded their original investment. Not surprisingly, a DLA lawyer told the Wall Street Journal that the FINRA member headquartered in Syosset, NY "disagrees with the decision." A number of class actions are pending presently.

View full article by Ed Pekarek and David Haimi @ NYSBA Securities Litigation &  Arbitration Blog