David Lerner Associates Sanctioned over Energy LPs

Representatives of broker-dealer firm David Lerner Associates (CRD# 5397) allegedly recommended unsuitable limited partnership investments to hundreds of customers, according to a recent sanction by the Financial Industry Regulatory Authority. The firm, headquartered in Syosset, New York, has been censured and suspended from engaging in the sale of proprietary, illiquid products.

A Letter of Acceptance, Waiver, and Consent (No. 2019063686211) describes FINRA’s disciplinary action against David Lerner Associates. Filed in May 2025, it states that the firm that the investments in question were Delaware limited partnerships formed in 2013 and 2017 to acquire and develop properties that produced hydrocarbon. In their prospectuses, the LPs were disclosed as illiquid investments with “significant risks”: for instance, at their outset, they had not selected properties for acquisition, and there was no guarantee of a liquidity event. “To date,” the AWC Letter states, “neither [LP] has had a liquidity event.”

The AWC Letter goes on to allege that David Lerner Associates was the “dealer manager and exclusive seller” of the LPs, with more than 600 customers investing in them. However, according to FINRA, the firm’s supervisory system was not reasonably designed to supervise these sales, and the firm “failed to respond to red flags that its representatives were making unsuitable recommendations.” For instance, firm representatives allegedly “increased customer risk tolerances and/or customers’ liquid net worths on investment profiles,” resulting in the sales of these investments to customers who were not eligible to purchase them. The AWC Letter goes on to state that the firm unsuitably recommended the products to approximately 200 customers, including those who were aged 76 or older “whose investment profiles were updated” to meet the eligibility requirements.

FINRA found that these alleged failures constituted violations of FINRA Rule 2111 as well as FINRA Rule 2010. These rules require brokers and firms to recommend suitable investments, and it forbids them from failing to observe high standards of commercial honor. As a result of these findings, FINRA censured the firm, ordered it to pay restitution of more than $1 million, and suspended the firm from selling illiquid proprietary products for a period of two years.

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