Securities Arbitration Lawyer Blog
The Financial Industry Regulatory Authority (FINRA) has sanctioned David Lerner Associates, Inc., and three of its registered representatives for the unsuitable sale of illiquid, high-commission, proprietary energy securities to its customers, specifically Energy 11, L.P., and Energy Resources 12, L.P. According to FINRA, David Lerner sold nearly $600 million of these securities to over 6,000 of its customers.
The penalties against David Lerner Associates, Inc. include a censure, an order to pay restitution of $1,002,566 to certain customers, and a two-year suspension from selling illiquid, proprietary products.
These sanctions highlight ongoing regulatory scrutiny of the firm’s sales practices, which have been the subject of multiple investigations, including one conducted by Iorio Altamirano LLP. Our firm has represented investors harmed by these unsuitable investments in private arbitrations.
FINRA’s Latest Sanctions Against David Lerner Associates
On May 20, 2025, FINRA issued an Acceptance, Waiver, and Consent (AWC) agreement against David Lerner Associates, Inc., citing the firm’s failure to ensure that sales of Energy 11, L.P., and Energy Resources 12, L.P., were suitable for over 200 customers. According to FINRA, the firm neglected to investigate red flags, such as sales to elderly and unsophisticated investors, and questionable changes to customer investment profiles that enabled ineligible purchases.
FINRA also concluded that the firm’s supervisory system was not reasonably designed to achieve compliance with FINRA’s suitability rule.
In addition, three registered representatives faced individual sanctions for their roles in recommending these illiquid securities:
- Martin Lerner (AWC No. 2019063686212): From January 2015 through November 2019, Martin Lerner failed to reasonably supervise the sales of Energy 11 and Energy 12, neglecting to ensure their suitability for customers. He was aware of, but failed to investigate, “red flags” such as sales to seniors and unsophisticated investors, and recommendations made concurrently with suspicious changes to customer investment profiles (e.g., liquid net worth, risk tolerance) that would otherwise make them ineligible for the products. Mr. Lerner accepted and consented to a one-month suspension and a $10,000 fine.
- Daniel Todd Lerner (AWC No. 2019063686213): In March 2019, Daniel Todd Lerner recommended an illiquid, proprietary limited partnership to a 92-year-old customer with a “moderate” risk tolerance, despite having no reasonable basis to believe it was suitable. The recommendation led the customer to invest approximately 25% of her liquid net worth in the product, an clearly unsuitable allocation given her age and risk profile. Mr. Lerner consented to a two-month suspension and a $5,000 fine.
- Maxim Tulupnikoff (AWC No. 2019063686214): From October 2015 through March 2019, Tulupnikoff recommended that a married couple, ages 48 and 50, invest in Energy 11 and Energy 12, despite their stated “moderately conservative” risk tolerance. Over this period, he facilitated nine purchases totaling $147,946 across their joint account and IRAs, all of which were unsuitable given their investment profiles and retirement savings goals. Mr. Tulupnkioff consented to a two-month suspension and a $5,000 fine.
A Pattern of Regulatory Violations
These latest sanctions are not isolated incidents. David Lerner Associates has a notorious history in the securities industry, having been sanctioned twenty-one times by various securities regulators, accumulating over $19 million in monetary fines and restitution orders, in addition to censures and injunctions.
FINRA has consistently pursued actions against brokers and supervisors associated with the sale of David Lerner’s proprietary energy-sector securities. Prior actions include:
- March 18, 2024: FINRA issued a Wells Notice to Martin Walcoe, President of David Lerner Associates, indicating a preliminary determination to recommend disciplinary action for failing to supervise sales of Energy 11 and Energy 12, unsuitable recommendations, and causing inaccurate books and records regarding customer profiles.
- June 20, 2023: Abbe Jan Wollins was sanctioned for unsuitable recommendations of limited partnerships formed to acquire and develop oil and gas properties (AWC No. 2019063686205).
- May 30, 2023: Branch manager Rande Aaronson was sanctioned for failing to reasonably supervise sales of Energy 11 and Energy 12 (AWC No. 2019063686204).
- September 2, 2022: Russ Kory was sanctioned for unsuitable recommendations of the firm’s proprietary limited partnerships (AWC No. 2019063686203).
- August 15, 2022: Jeffrey D. Basford declined to appear for on-the-record testimony during an investigation into potential unsuitable sales of proprietary energy products (AWC No. 2019063686202).
- February 8, 2021: Charles Bonilla was sanctioned for recommending energy sector securities without a reasonable basis to believe they were suitable, failing to understand the risks and costs involved (AWC No. 2020067626001).
These repeated violations highlight systemic issues in the firm’s oversight and sales practices, particularly with high-risk, illiquid investments like Energy 11, L.P., and Energy Resources 12, L.P.
The Importance of Suitability
These regulatory actions highlight a critical principle in securities law: suitability. Brokerage firms and their representatives have a fundamental obligation to recommend investments that are suitable for their clients, taking into account their age, financial situation, investment experience, risk tolerance, and investment objectives. The repeated sanctions against David Lerner Associates and its personnel demonstrate a pervasive failure to uphold this duty, particularly with complex, illiquid, and high-commission products like Energy 11 and Energy 12.
If you or someone you know invested in Energy 11, L.P., or Energy Resources 12, L.P., through David Lerner Associates, especially if these investments were a significant portion of your portfolio or were made despite a conservative investment profile, you may have grounds for a claim.
Iorio Altamirano LLP remains committed to holding brokerage firms and financial advisors accountable for misconduct. We encourage you to contact us for a free and confidential consultation to discuss your options.
Why Choose Iorio Altamirano LLP?
Based in New York, NY, Iorio Altamirano LLP is a trusted securities arbitration law firm with a proven track record of representing investors harmed by broker misconduct. Our attorneys combine legal expertise with a client-centered approach, ensuring personalized attention and aggressive advocacy. As we prepare to launch our new firm, Iorio Law PLLC, we remain committed to protecting investors’ rights across the country.
Don’t wait to take action. The statute of limitations for securities claims can be short, so reach out to our team today to learn how we can help you recover your investment losses.