(Bloomberg News) David Lerner Associates Inc. has been accused of targeting unsophisticated and elderly customers while selling real estate investment trust shares without considering whether the illiquid security was suitable for its clients.

The Syosset, New York-based brokerage, known for its "Take a tip from Poppy" advertising slogan, misled investors who bought more than $300 million of shares in the $2 billion Apple REIT Ten offering this year, the Financial Industry Regulatory Authority said yesterday in a disciplinary complaint on its Web site. The firm denies the allegations, according to a statement.

In soliciting customers for Apple REIT Ten, DLA provided misleading information about distribution rates for a series of predecessor securities that are now closed to investors, Finra said. The figures failed to show that distributions far exceeded income and were funded by debt that increased leverage in the REITs, which invest in extended-stay hotels, the regulator said.

DLA has sold almost $6.8 billion of Apple REIT shares to more than 122,000 customers since 1992, according to Finra, the industry-funded regulator for U.S. brokerages. Those sales have generated more than $600 million, accounting for more than 60 percent of the firm's business since 1996, Finra said.

The complaint is the first step in a formal proceeding, Finra said today. It isn't filed in court, and the firm can request a hearing before a disciplinary panel, the regulator said in its statement.

'Due Diligence'

"The firm conducted thorough due diligence of Apple REIT Ten's offering documents and audited financial statements," DLA said in its statement. "DLA will vigorously defend these claims. It looks forward to the opportunity to set the record straight and expects to be completely vindicated."

In September, DLA paid a $255,000 fine for failing to provide required information in connection with the replacement of variable life insurance policies and annuity contracts from November 1998 through February 2004, according to the New York State Insurance Department.

A year ago this month, DLA was accused by Finra of overcharging customers on sales of municipal bonds and mortgage securities. That case is still pending, according to Finra's brokerage records.