David Lerner: Energy 11 and 12

David Lerner Associates, Inc. (“David Lerner Associates”) is facing numerous customer complaints related to its sale of Energy 11, L.P. (“Energy 11”) and Energy Resources 12, L.P. (“Energy 12”). The complaints allege that Energy 11 and Energy 12 were not suitable investments and that David Lerner Associates failed to supervise the sales and marketing of the investments. The complaints also include allegations that David Lerner Associates and its financial advisors misrepresented material facts related to the risks associated with these illiquid, concentrated, and high-fee products.

Based on public records, Iorio Altamirano LLP believes that the following brokers at David Lerner Associates may have recommended Energy 11 or Energy 12 to customers:

If a broker at David Lerner Associates recommended Energy 11 or Energy 12 to you and you have suffered investment losses, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.

Energy 11 and Energy 12 are illiquid, non-traded limited partnerships sold as private placement securities. The limited partnerships invest in the oil, gas, and energy sector, which has been extremely volatile the past several years. Energy 11 and Energy 12 were not suitable for most conservative or retired investors.

Energy 11 and Energy 12 both sought to acquire interests in both producing and non-producing oil and gas properties located onshore in the United States. In other words, Energy 11 and Energy 12 were speculating that non-producing leaseholds would eventually produce.

According to the prospectus for Energy 11 and Energy 12, David Lerner Associates was the exclusive dealer-manager and received 6% in selling commissions. David Lerner Associates is also entitled to a contingent incentive fee of up to an amount equal to 4% of gross proceeds of units sold. Based on public disclosures, it appears that David Lerner Associates has received over $35 million in seller commissions for selling Energy 11 and Energy 12 to its customers and is entitled to an additional $23.7 in contingent incentive fees.

According to public filings, David Lerner Associates’ marketing strategy included holding “seminars” and providing free “food” to prospective customers. Energy 11 and Energy 12 reimbursed David Lerner Associates for its expenses.

David Lerner has also received several customer complaints related to brokers’ recommendations to purchase the Spirit of America Energy Fund (SOAEX). To read more about the Spirit of America Energy Fund, please click on the following link: Spirit of America Energy Fund (SOAEX): How to Recover Investment Losses From David Lerner Associates, Inc.

Earlier this year, the Financial Industry Regulatory Authority (“FINRA”) suspended former David Lerner Associates financial advisor, Charles Bonilla, from the securities industry for five months for recommendations of what is believed to be SOAEX and Energy 11. FINRA concluded that Mr. Bonilla lacked a reasonable basis to recommend these products because he did not perform reasonable diligence before making the recommendations and failed to understand their fundamental features and risks. To read more about the suspension of Charles Bonilla and FINRA’s allegations, click on the following link: Former David Lerner Associates Financial Advisor, Charles Bonilla, Suspended by FINRA for Unsuitable Energy-Sector Securities – Boca Raton, FL

Broker Daniel T. Lerner has received numerous complaints related to Energy 11. First, on April 29, 2019, a customer filed a securities arbitration complaint related to recommendations of Energy 11, the Great Art Fund (“GAF”), and an unnamed mutual fund. Then, on July 2, 2020, another customer alleged “unsuitability, misrepresentation/omission, [and] breach of fiduciary duty,” resulting in $175,000 in damages. Mr. Daniel T. Lerner received a third customer complaint on September 23, 2020. According to his public disclosure report, the allegations included “unsuitability, misrepresentation, fraud, and breach of conduct in connection with Energy 11.” This blog has previously written about Mr. David T. Lerner.

On February 28, 2020, a customer filed a securities arbitration complaint against broker Francisco Cabral and David Lerner Associates seeking $800,000 in damages. The complaint alleged “unsuitability, misrepresentation/omissions, breach of fiduciary duty, [and] failure to supervise” arising out of recommendations related to Energy 11, a mutual fund, and a Unit Investment Trust.

Martin Lerner, another financial consultant with David Lerner, has been the subject of six customer complaints. Most recently, a customer has filed a FINRA arbitration complaint alleging $100,000 damages caused by Energy 12 and an energy mutual fund, SOAEX. The complaint alleges that the investments were unsuitable and that Matin Lerner and David Lerner Associates made material misrepresentations and omissions in connection with the recommendations.

Another customer alleged $300,000 in damages on October 27, 2020, arising out of a recommendation by broker Rafael Klein to purchase Energy 11 and an unnamed mutual fund. The arbitration complaint alleged “unsuitability, misrepresentation/omission, breach of fiduciary duty, [and] failure to supervise.” Another customer filed a securities arbitration complaint in August 2020, making similar allegations related to Energy 11 and Energy 12.

On October 14, 2020, a customer filed a FINRA arbitration complaint against broker Lawrence Merl and David Lerner Associates seeking $999,999 in damages, alleging that Mr. Merl’s recommendation to purchase Energy 11 was not suitable. The complaint also alleged that Mr. Merl and David Lerner Associates made material misrepresentations connected with the recommendation to purchase the security.

An investor filed a FINRA arbitration complaint against broker Glenn Werner on October 21, 2020, seeking $250,000 in damages. The complaint alleged “unsuitability, misrepresentation, [and] breach of fiduciary duty” concerning recommendations related to Energy 11 and an unnamed mutual fund.

Broker Michael Norton has been the subject of eight customer complaints, including one pending complaint related to Energy 11. The complaint, filed on November 13, 2020, alleged unsuitability and misrepresentation/omission. The complaint alleged $50,000 in damages.

On November 17, 2020, a customer filed a securities arbitration complaint against stockbroker Richard Eden. The complaint alleges “unsuitability, misrepresentations/omission, unauthorized trade, [and] breach of fiduciary duty” related to Energy 11.

When an investor suffers investment losses due to misconduct by a financial advisor or broker-dealer, the investor can file a securities arbitration claim against their financial advisor and/or broker-dealer to be compensated. Filing an arbitration claim is similar to filing a lawsuit and suing your broker for compensation.

Brokerage firms like David Lerner must properly supervise financial advisors and customer accounts. Brokerage firms must also establish and maintain a reasonably designed system to oversee account activity to ensure compliance with securities laws and industry regulations. When a brokerage firm fails to sufficiently supervise its financial advisors or the investment account activity, it may be liable for investment losses sustained by customers.

Securities arbitration is a unique and complex practice area. Investors should seek out experienced counsel who understands the FINRA forum and can navigate the arbitration process to effectively advocate on their behalf.

If you or a loved one were a customer of David Lerner and either sustained financial losses or suspect that the firm did not have your best interest in mind when recommending investments or account transactions, contact New York securities arbitration attorney August Iorio of Iorio Altamirano LLP. August Iorio can be reached at august@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.

Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. Iorio Altamirano LLP pursues FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by stockbrokers and brokerage firms.

See also:

• Iorio Altamirano LLP Files Securities Arbitration Claim Against David Lerner Associates, Inc. Related to Unsuitable Recommendations Made by President and CEO Martin Walcoe
• How to Recover Puerto Rico Bond Losses From David Lerner Associates, Inc.