David Lerner and Apple REIT
The news that FINRA filed a complaint against David Lerner Associates (DLA) hit yesterday.  Here is a Bloomberg article.  According to the article DLA is accused of "of targeting unsophisticated and elderly customers while selling real estate investment trust shares without considering whether the illiquid security was suitable for its clients."  Here is another quote:

In soliciting customers for Apple REIT Ten, DLA provided misleading information about distribution rates for a series of predecessor securities that are now closed to investors, Finra said. The figures failed to show that distributions far exceeded income and were funded by debt that increased leverage in the REITs, which invest in extended-stay hotels, the regulator said. 

DLA denies the allegations.   I find it shocking that at a non-traded REIT would not only use leverage, but also pay distributions that exceed income.

I don't know anything about the Apple REITs other than what I have read the past day.  The Snyder Kearney blog has a more serious post on this matter and link to the FINRA news release.

Update:  Here is a good Wall Street Journal article on DLA and Apple REITs.  Here is a key section:

At the root of Finra's action against the Lerner firm is the way that four Apple REITs have generated returns in the past and maintained their shares at a constant price of $11. All of the REITs, which were launched from 2004 to 2008 and primarily purchased extended stay hotels, have been paying returns of 7% to 8%, according to the complaint.

But the Lerner firm has failed to disclose, in describing the products on its website, that the income from real estate was insufficient to support these, Finra said. Rather, the distributions were partially funded by "leveraging the REITs through borrowings and returning capital to investors," the complaint states.

Finra also said the constant $11-a-share valuations for the four REITs are inaccurate, given they didn't reprice during the financial crisis when the extended stay hotel market "suffered a significant, material downturn." The valuations, Finra said, should have been a red flag for the Lerner firm, spurring it to conduct further due diligence before selling its latest product, Apple REIT 10.