Erez Law recently filed a FINRA arbitration against David Lerner Associates on behalf of a retired widow who entrusted her broker and David Lerner Associates with her irreplaceable retirement savings.
The complaint was regarding investment losses with broker Gary Isler (CRD# 1514385), who was a registered representative of David Lerner Associates in Lawrenceville, New Jersey since 1996.
The Erez Law client, who was a conservative investor, and that she was not interested in high-risk investments or investment strategies, alleges the following in the newly filed FINRA claim:
According to the claim, the client explained to Isler that she primarily invested in municipal bonds, and that she was interested in safe investments that would generate income and preserve her retirement savings. Regrettably, despite the client’s stated aversion to high-risk investments and strategies, Isler and David Lerner Associates implemented a speculative, unauthorized and unsuitable investment strategy with devastating results.
It is alleged that Isler pursued a speculative, unauthorized and unsuitable strategy of needlessly concentrating the client’s retirement savings in a single high risk, unsuitable and proprietary David Lerner Associates mutual fund that invested almost entirely in high-risk investments from the volatile energy sector, including the Spirit of America Energy Fund, a newly created proprietary David Lerner Associates mutual fund.
Erez Law alleges that Isler represented to the client that David Lerner Associates’ Spirit of America Energy Fund was a good investment and was well suited for her goal to generate income and preserve her principal. In reality, the Spirit of America Energy Fund is a high-risk proprietary David Lerner Associates mutual fund that is concentrated almost entirely in investments from the volatile energy sector.
According to the claim, Although the Spirit of America Energy Fund’s prospectus states that it will invest at least 80% of its assets in energy sector investments, in reality, the fund invested more than 95% of its assets in investments from the volatile energy sector. Moreover, the Spirit of America Energy Fund invested heavily in some of the most aggressive and riskiest types of energy sector investments, including exploration and production (E&P) master limited partnerships (MLPs). The client informed Isler that she was not comfortable investing in the Spirit of America Energy Fund.
It is alleged that Isler purchased the unsuitable Spirit of America Energy Fund without The client’s required authorization, Isler’s speculative investment strategy magnified the already significant risks associated with the fund by exposing the client to significant sector concentration risk. Isler’s reckless investment strategy exposed the client to the risks associated with high risk and highly correlated energy sector companies which were vulnerable to the same adverse market conditions, and ultimately resulted in significant losses to the client’s irreplaceable savings. The client’s losses could have easily been avoided had Isler simply followed the basic investment principle of diversification.
According to the claim filed by Erez Law, Isler’s speculative investment strategy significantly increased the risks to which the client was unknowingly exposed. There was no reasonable basis for dangerously concentrating the client’s savings in a single high-risk proprietary mutual fund that invested almost entirely in highly correlated investments from the volatile energy sector.
Erez Law alleges that Isler failed to adequately disclose the enormous degree of risk, including sector concentration risk, associated with the speculative and unsuitable investment strategy he employed in the client’s accounts.
David Lerner Associates’ proprietary Spirit of America Energy Fund has lost approximately 90% of its value since late 2014, causing the client to suffer devastating losses to her retirement savings.
In late 2014, the energy sector experienced significant volatility after the price of oil dropped from over $100 per barrel to below $50 per barrel. Since late 2014, the energy industry has been in turmoil and many of the MLPs and other energy sector investments owned by the Spirit of America Energy Fund have filed for bankruptcy.
In addition to the case above, Isler recently has been the subject of three additional customer complaints between 2015 and 2018, according to his CRD report:
- January 2018. “Unsuitability, misrepresentation/omission, breach of fiduciary duty.” The customer sought $350,000 in damages and the case was settled for $15,862.50.
- October 2016. “Unsuitability, misrepresentations and omissions.” The customer sought $340,000 in damages and the case was settled for $20,000.
- October 2015. “Misrepresentation, Suitability.” The customer sought $162,407.95 in damages and the case was settled for $20,179.74.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, David Lerner Associates may be liable for investment or other losses suffered by Isler’s customers.
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.