J.P. Turner gussies up for Schorsch

Independent B-D spends $8.8 million to resolve litigation prior to acquisition by RCS Capital

Apr 9, 2014 @ 1:20 pm

By Bruce Kelly

Like a bride getting ready for her wedding day, independent broker-dealer J.P. Turner & Co. last year spent a staggering $8.8 million to resolve outstanding litigation as it prepares to get hitched to Nicholas Schorsch's RCS Capital later this quarter.

That sum, 10.7% of the firm's $82.3 million in total revenue last year, pushed J.P. Turner into a loss of $3.2 million for 2013, according to a filing in March with the Securities and Exchange Commission. It is also more than five times the $1.65 million the firm set aside for litigation expenses in 2012.

(See also: Schorsch buys independent broker-dealer J.P. Turner; second deal in a week)

The company “had a significant loss for 2013 that was primarily related to costs incurred to defend and settle litigation and arbitration,” according to the filing. “During 2013, [J.P. Turner and related companies] were dependent upon capital contributions from their owners for working capital and to meet its regulatory net capital requirements. In addition, the owners made capital contributions in January 2014 to enable the company to meet required net capital.”

Heidi Wheatley, a J.P. Turner spokeswoman, said that the firm made a conscious effort last year to wrap up any lingering litigation or arbitration. “In 2013, [investor claims] we normally would have defended, we settled to get off our backs and get a fresh start with RCAP,” she said.

“We're getting rid of advisers we don't want,” Ms. Wheatley said, adding that six years ago the firm had 600 brokers and now has just 325.

RCS Capital's announcement to buy J.P. Turner caused some in the independent broker-dealer industry to question Mr. Schorsch's strategy. J.P. Turner in the past has focused on brokers with highly transactional books of business and those brokers at times ran into trouble with regulators. The independent broker-dealer industry has steadily moved away from the transactional broker, instead seeking reps and advisers who generate fees from assets under management.

RCS Capital Corp., of which Mr. Schorsch is executive chairman, in January said it intended to acquire J.P. Turner for $27 million in cash and stock. In total, RCS Capital and related entities have closed or are working to complete five broker-dealer acquisitions in the past 10 months, with others potentially in the wings.

In an interview Wednesday, Mr. Schorsch said that the money J.P. Turner paid out for litigation and arbitration showed that the firm had moved past its regulatory problems. “It's clearly the final piece,” he said, noting that midsize broker-dealer Berthel Fisher & Co. and giant LPL Financial also recently made settlements with regulators and investors to close litigation.

“Most of this [legal action] is from advisers who have left,” Mr. Schorsch said. “This is the end of the story, not a new story.”

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Why broker-dealers are on a roll

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss last year's bounce-back for IBDs.

Latest news & opinion

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

Brokers accept proposed SEC rule on who can call themselves an adviser

Some say the rule will clear up investor confusion, but others say the SEC didn't go far enough.

SEC advice rule: Here's what you need to know

We sifted through the nearly 1,000-page proposal and picked out some of the most important points.

Cadaret Grant acquired by private-equity-backed Atria

75-year-old owner Arthur Grant positions the IBD for the 'next 33 years.'

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print