Fidelity, Schwab to halt AR Capital sales

Firms pull the plug after Massachusetts charges RCS Capital with fraudulently rounding up proxy votes to support real estate deals sponsored by AR Capital

Nov 19, 2015 @ 12:41 pm

By Bruce Kelly

A major clearing firm, Fidelity Clearing & Custody, and a leading custodian for registered investment advisers, Charles Schwab & Co. Inc., have halted or will halt by the end of the week sales of AR Capital products.

Nicholas Schorsch's AR Capital's nontraded real estate investment trusts and other alternative investment products are marketed to advisers through Realty Capital Securities, or RCS, a wholesaling brokerage that was charged last week by Massachusetts with fraud.

RCS, a division of RCS Capital Corp., was charged with fraudulently rounding up proxy votes to support real estate deals sponsored by AR Capital.

Fidelity and Schwab will be halting sales weeks before AR Capital shuts the pipeline down itself.

In a major reversal, the company said Monday that it would stop creating products and stop selling alternative investment products by the end of the year.

Spokeswomen for Fidelity and Schwab confirmed the decisions via email.

“Effective (Thursday), Fidelity will no longer facilitate new purchase subscriptions for certain Realty Capital Securities-distributed REIT and (business development company) products,” wrote Nicole Abbott, a spokeswoman for Fidelity Institutional.

“Effective Friday, Schwab is suspending purchases of interests in non-listed [AR Capital] products,” wrote Schwab spokeswoman Susan Forman. “Existing positions in these funds will continue to be serviced and maintained by Schwab in accordance with our normal servicing standards.”

A spokeswoman for Pershing, Cassandra Osei, did not immediately respond to questions regarding whether it will continue sales of ARC branded products distributed through RCS.

Also last week, Cetera Financial Group, the retail brokerage network owned by RCS Capital, halted sales of ARC-branded REITs and other alternative investments.

Meanwhile, spokespeople for two other large broker-dealer networks, AIG Advisor Group and National Planning Holdings, confirmed that it had not lifted the suspension of AR Capital products from last year. That's when another company formerly controlled by Mr. Schorsch, American Realty Capital Properties Inc., now Vereit Inc., reported a $23 million accounting error over the first half of 2014 that was intentionally uncorrected.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Retirement: It's no longer about feeding pigeons from a park bench.

Today's retirees expect so much more from retirement than previous generations, and advisers are in prime position to help their clients understand what's important and what's not.

Latest news & opinion

Morgan Stanley CEO is happy that brokers are staying put

Firm has seen little attrition since it dumped the broker protocol last fall, Gorman says.

Bills to reform adviser regulation, increase sophisticated investors and protect seniors pass House

Measures included in package of 32 bipartisan bills meant to ease rules, spur investment

Genstar Capital buys majority stake in Cetera Financial Group

The private-equity firm has previously invested in such companies as Mercer Advisors and AssetMark.

Cetera Financial Group close to announcing its acquisition by private equity

Details of sale to one or more P-E firms could be announced as early as today.

10 best states for retirement

When it comes to places to retire, here are the 10 best states for enjoying your golden 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