RCAP confirms regulatory inquiries

SEC, Finra and state securities agencies have been in contact with Schorsch firm after $23M error revealed at sister company

Nov 17, 2014 @ 10:26 am

By Bruce Kelly

RCS Capital Corp. said it has been in contact with the Securities and Exchange Commission, the Financial Industry Regulatory Authority Inc. and state securities regulators after a sister company, American Realty Capital Properties Inc., or ARCP, revealed last month that it had made a $23 million accounting error.

RCS Capital, or RCAP, “and its subsidiaries have continued to respond to ongoing verbal inquiries, requests for correspondence, information and discussions with the SEC, Finra and such state regulatory agencies, including with respect to the ARCP disclosure,” according to RCAP's quarterly earnings report filed with the SEC. The report made no mention of a formal investigation into RCAP by the SEC or Finra.

(More: RCS Capital could be facing major changes)

Bloomberg first reported the SEC and Finra inquiries Friday evening.

RCAP also confirmed that Secretary of the Commonwealth of Massachusetts William Galvin had begun an investigation into the firm.

Realty Capital Securities, an RCAP subsidiary that acts as a wholesaler for nontraded REITs and other alternative investments, on Nov. 7 “received a subpoena from the Massachusetts Secretary of the Commonwealth, Securities Division,” according to RCAP's quarterly report. The subpoena required “the production of certain documents and other materials, dated from Jan. 1, 2014 to the present, relating to sales by Realty Capital Securities of certain non-traded REITs and similar products sponsored or co-sponsored by American Realty Capital,” the nontraded REIT sponsor of which Mr. Schorsch is CEO and chairman.

RCAP “is actively complying with the subpoena and cooperating with the division,” according to the filing.

Real estate investment trust czar Nicholas Schorsch is the executive chairman of RCAP. He is also the former chief executive and current chairman of ARCP, which last month disclosed that it intentionally did not correct the $23 million accounting error over the first half of the year.

The chief financial officer of ARCP, Brian Block, resigned after the accounting mistake was revealed. He was also the former CFO of RCAP, serving in that role from February 2013 to December 2013.

The FBI and SEC are also investigating ARCP, according to news reports.

RCAP spokesman Andrew Backman declined to comment.


What do you think?

View comments

Most watched


Finding your edge from Tony Robbins

Guru Tony Robbins has helped a lot of people, but armed with his psychology Financial Advisor Josh Nelson has helped his practice soar.


Finding innovation in your firm

Adam Holt of AssetMap explains how advisers understand they need to grow, but great innovation may be lurking right under your nose.

Latest news & opinion

10 IBDs with the most annuity revenue

Here are the independent broker-dealers that brought in the most annuity revenue last year.

LPL expanding platform to include employee brokers

The largest IBD in the country has agreed to buy a small broker-dealer in Florida to kick off the new effort.

Hopes high for bill to ease small-firm adviser regulations

High-ranking, bipartisan members of the House Financial Services Committee back the legislation.

Redtail CRM data breach exposes personal client data

The information exposed includes names, addresses, dates of birth and Social Security numbers.

This strategy can double your estate-tax exemption

'Portability' allows a surviving spouse to tack the decedent's exemption on to his or her own. Despite the higher threshold for paying estate taxes in the 2017 tax law, experts recommend filing for the benefit.


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.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print