Another major independent broker-dealer is putting the brakes on selling nontraded real estate investment trusts sponsored by a company controlled by
REIT czar Nicholas Schorsch.
Cambridge Investment Research Inc. informed its 3,041 registered reps and advisers on Wednesday that it was halting, for the moment, sales of three investment products with the Cole brand. Cambridge Thursday said it was suspending sales of four products distributed by Realty Capital Securities, the wholesaling broker-dealer that drives sales of Mr. Schorsch’s nontraded REITs.
Cole Capital Partners and Cole Capital Advisors Inc. are owned by American Realty Capital Properties Inc., with the ticker ARCP, which last week disclosed a $23 million accounting error in the first half of the year that was spotted but intentionally not corrected.
Mr. Schorsch was ARCP's chief executive and chairman until Oct. 1; he remains its chairman.
Realty Capital Securities is a subsidiary of RCS Capital Corp., the publicly traded wholesale and retail broker-dealer holding company of which Mr. Schorsch is executive chairman.
“Our due diligence committee made the recommendation and we have temporarily suspended sales in three Cole products with the expectation that there is more clarity over the next weeks” to come, wrote Cambridge spokeswoman Cindy Schaus late Wednesday in an email to InvestmentNews. She did not identify the specific Cole REITs that Cambridge has suspended.
“Cambridge believes a temporary suspension of sales in four Realty Capital Securities products is in the best interests of our advisor clients,” she wrote.
American Realty Capital is the major product manufacturing arm of Mr. Schorsch's
REIT empire. As a wholesaling broker-dealer, Realty Capital Securities distributes those ARC REITs to broker-dealers with reps who have retail clients.
(Related: Schorsch's B-D network won't sell some of his REITs)
A spokesman for ARCP, Andy Merrill, did not return a call Thursday morning seeking comment. A spokesman with RCAP, Tony DeFazio, did not immediately respond to a request for comment late Thursday.
In the past week, some of the largest independent broker-dealers have said they are putting a temporary halt to sales of nontraded REITs sponsored by Cole or ARC. The largest IBD,
LPL Financial, earlier this week said it was “indefinitely suspending” sales of investment products sponsored by ARCP, meaning Cole REITs, as well as products sponsored by RCS Capital Corp. and affiliates.
(See also: With stock off sharply, Schorsch's RCS Capital says 'We're not ARCP')
Mr. Schorsch is executive chairman of RCS Capital, or RCAP. It is the leading wholesaler of nontraded REITs, and competes with LPL as a leading network of independent reps and advisers.
