Erez Law recently filed FINRA arbitration against David Lerner Associates, Inc. regarding losses sustained from investments in unsuitable Puerto Rico bonds.
The customers’ account was serviced over the years by David Portnoy (CRD #705396), Loreto Testani (CRD #4518196), and Daniel Lerner (CRD #1255769), who were all employees and registered representatives of David Lerner Associates, Inc.
According to the claim filed by Erez Law, the customers entrusted David Lerner Associates, Inc. with their irreplaceable retirement savings, and were customers of the firm since the 1990s. The couple informed David Lerner Associates, Inc. that they were conservative and unsophisticated investors who were interested in investing their retirement savings in order to generate income to meet their expenses while preserving their irreplaceable retirement savings. It is alleged that David Lerner Associates, Inc. recommended the customers invest in high risk and unsuitable Puerto Rico bonds, including:
- Puerto Rico Infrastructure Financing Authority Revenue Series B
- Puerto Rico Public Buildings Authority Revenue Series Q
- Puerto Rico Public Buildings Authority Revenue
Puerto Rico suffers from long-term financial and economic deficiencies that rendered its credit increasingly more speculative. The deterioration of Puerto Rico’s financial condition culminated in its debt being downgraded to junk status or speculative (below investment grade). For the past several years, Puerto Rico has been struggling with compounding debt and economic decline. As a result, the value of Puerto Rico’s municipal tax-free bonds has considerably fallen. Since September 2013, when the steep decline in Puerto Rico bond values began, investors holding these bonds have suffered massive losses. In May 2017, Puerto Rico filed for bankruptcy protection from creditors in what is being described as the largest municipal bankruptcy filing in history.
The Puerto Rico bonds that David Lerner Associates, Inc. recommended to the clients have defaulted and are worth a fraction of what they paid for them. For example, the Puerto Rico Financing Authority bonds are worth approximately $4 and have been nearly decimated and have resulted in the couple losing nearly their entire investment.
Erez Law alleges that David Lerner Associates, Inc. failed to adequately explain the significant credit risks associated with the Puerto Rico bonds it recommended, and the firm led the clients to believe that the Puerto Rico bonds it recommended were secure and low risk investments. David Lerner Associates, Inc. magnified the risks to which the clients were exposed by recommending that they overconcentrate their account in Puerto Rico bonds, resulting in the couple losing a significant amount of their savings when Puerto Rico bonds lost most or nearly all of their value. Additionally, the former David Lerner Associates, Inc. clients allege that the firm recommended that the couple continue to hold their Puerto Rico bonds as they plummeted in value, even as the clients expressed their concerns.
The Erez Law clients allege that the David Lerner Associates, Inc. financial advisors them that they did not need to worry about their capital and were told to disregard the decline in prices of their Puerto Rico bonds and that the bond prices would recover. Additionally, the clients allege that David Lerner Associates presented to them that the declines in Puerto Rico bond prices did not affect them because as long as they do not sell their bonds they will continue to receive interest payments and they will receive the return to their principal once the bonds mature.
Portnoy was registered at David Lerner Associates, Inc. in Syosset, New York from 1996 to 2012, and he is currently not registered with any firm. Portnoy does not have any disclosures on his CRD.
Testani was registered with David Lerner Associates, Inc. in Syosset, New York from 2002 to 2015, and he is currently registered with Wells Fargo Clearing Services, LLC in Melville, New York since 2015.
Lerner has been registered with David Lerner Associates, Inc. in White Plains, New York since 200. Lerner has been the subject of two customer complaints, one of which was closed without action in 2003, according to his CRD report:
August 2016. “Misrepresentation from August 2015 to August 2016.” The customer seeks $16,756 in damages and the case is currently pending.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.