Poppy Thumbs His Nose at Finra. Again.

David Lerner, a k a “Poppy” in his ubiquitous radio commercials in the New York area, has been suspended from any association with David Lerner Associates, the firm he founded, or any other brokerage firm, regulators announced on Monday.

Not so fast.

The 76-year-old Mr. Lerner was forced to step aside by the Finra, the Financial Industry Regulatory Authority, which said he was banned from the brokerage business for a year and barred from any supervisory role for another two years.

But the company says Mr. Lerner “will become more involved with other non-broker/dealer business enterprises that have been developed over the years, such as the Spirit of America mutual funds.”

That he isn’t leaving the securities business, despite the Finra ban, should have come as no surprise to the regulator. Its settlement agreement contains a litany of examples of Finra’s directing the firm to stop making misleading statements, and the firm’s continuing to make such statements.

According to the settlement, David Lerner Associates regularly overcharged customers buying municipal bonds and mortgage-backed securities. But its most egregious violations concerned a series of what you might call private real estate investment trusts. I call them private because nobody sells them except David Lerner Associates, and they do not trade in public markets. But they are registered with the Securities and Exchange Commission.

They are known as Apple REITs, and they primarily invest in extended-stay hotels. I wrote about them in 2011 when Finra filed its complaint. David Lerner sold them at $11 a share to its customers — described as “unsophisticated and elderly” in the settlement — and maintained that as the value through boom and bust.

One of the actions against the firm that it settled says David Lerner Associates ignored “red flags indicating that management of Apple REIT 10 may adopt improper valuation procedures” to maintain that $11 price.

The firm agreed to pay about $12 million to customers who had bought that offering and to hire a consultant to determine which customers should get the money. It does not make clear exactly what the criteria will be for divvying up the funds, but it does specify that recipients can still sue for more.

Somehow that fact went unmentioned in the Lerner statement.

When I asked, David Chauvin, the company’s spokesman, said the firm “is still offering Apple REIT 10 per its underwriting agreement with Apple 10 at an offering price of $11 per unit.”

Geez. After you effectively get penalized for overcharging customers, it takes a certain perspective on regulatory effectiveness to keep selling the same product at the same price.

How is Apple 10 doing? Its latest S.E.C. filing shows it is paying dividends to investors at an annual rate of 82.5 cents a share. The bulk of that does not come from operations. Through June, it paid out $43.5 million, more than three times the $12.3 million in cash from operations.

It appears to have financed those payments largely through sales of new shares by David Lerner Associates.

David Lerner Associates is going to pay about $14 million in penalties as a result of this settlement and a related regulatory action. To put that into perspective, the firm has taken in $47.6 million from Apple REIT 10 for selling shares in the trust.

Nancy Condon, a Finra spokeswoman, called Mr. Lerner’s decision to stay at the mutual fund operations “regulatory arbitrage.” She said that Mr. Lerner had to “stay off the premises” of the brokerage firm and pledged that the regulator would monitor his activities closely to ensure he did so.

And, she added, “he won’t be able to do those advertisements any more.”

It would be nice if Finra had done more to ensure that customers know what kind of firm they are dealing with. The firm should have been required to furnish a copy of the settlement to every customer and prospective customer. It is hard to believe that anyone reading and understanding that document would trust this firm with money.