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RCAP Shutting Down Wholesaling REIT Division After Fraud Charges, Drop In Sales

RCS Capital Corp. ("RCAP") announced this week that it is closing its wholesaling brokerage division following a decline in sales of nontraded real estate investment trusts and allegations of fraud. The shutdown will result in the layoff of roughly 150 employees. Another 50, elsewhere in the company, will also lose their jobs. The company was founded by former real estate mogul Nicholas Schorsch, who remains a principal shareholder. The wholesaling brokerage division, Realty Capital Securities ("RCS"), was the centerpiece of his nontraded REIT empire, which at its peak raised hundreds of millions of dollars a month in equity from mom-and-pop investors who bought Schorsch's REITs. RCS will close in March. In addition to that announcement, RCAP stated that the division had come to a $3 million settlement with the Massachusetts security division, which had charged RCS with fraudulently gathering proxy votes to support real estate deals sponsored by Schorsch's AR Capital, which managed Schorsch's REITs. “RCS is pleased to confirm it [...]

By |December 3rd, 2015|Fraud, Press Releases & News|
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AR Capital Halts Creation Of New Nontraded REITs

AR Capital, the massive real estate investment trust sponsor established by Nicholas Schorsch, will cease creating and selling new alternative investment products. “As a result of regulatory and market uncertainty affecting capital raising for both new and existing offerings in the direct investment industry,” AR Capital will stop taking new investor funds for the programs by the end of this year, according to a company statement. These programs include Business Development Corporation of America II, ARC Healthcare Trust III, New York City REIT II, ARC Hospitality Trust and ARC Global Trust II. William Kahane, co-owner of AR Capital, noted the Department of Labor's proposed fiduciary standard and new client account statement pricing standards for nontraded REITs and other alternative investments as reasons for AR Capital's decision to withdraw from the market it used to control. This decision comes mere days after the commonwealth of Massachusetts charged Realty Capital Securities ("RCS") with fraudulently gathering proxy votes to support real estate deals sponsored [...]

By |November 17th, 2015|Press Releases & News|
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FINRA Fines Six IBDs For Failing To Discount Large REIT Sales

Voya Financial Advisors Inc., Transamerica Financial Advisors Inc. and four other independent broker-dealers failed to give clients appropriate discounts on large sales of nontraded real estate investment trusts and business development companies. In turn, FINRA fined the six over $500,000 combined. The fines comes as part of FINRA's crackdown on firms not properly giving their customers particular discounts, called breakpoint discounts. Discounts are available on sales of particular nontraded REITs, usually when the sale is for more than $500,000. According to a number of prospectuses for nontraded REITs, the price of a REIT is normally ten dollars per share with a seventy cent commission to the broker, but for sales between $501,000 and $1 million, the price can drop to $9.90 per share with the commission falling to sixty cents. The six firms “failed to identify and apply volume discounts to certain customers' eligible purchases of non-traded REITs and BDCs, resulting in customers paying excessive sales charges,” according to the FINRA [...]

By |October 15th, 2015|FINRA, Press Releases & News|
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Former Broker, Robert K. Smith, Under Investigation

Robert Keith Smith, formerly a broker with Berthel Fisher, has been accused by more than ten of his clients throughout his career of overconcentrating their accounts in private placement securities, including equipment leasing programs, oil and gas investments, and non-traded real estate investment trusts. Smith started his career in 2000 with American General Securities and was registered with the firm until May 2006. Subsequently, he was associated with ProEquities until June 2010 and with Berthel, Fisher & Company Financial Services until June 2014. Numerous complaints against the same broker regarding the same or similar charges of misconduct is unusual in the brokerage industry. The majority of brokers go their whole careers without having a complaint against them. The number of brokers who have more than two customer complaints against them is remarkably low. Accordingly, having over ten customer complaints against Smith, all of which regard private placement securities, is highly irregular. The kinds of products Smith sold to investors on [...]

By |August 4th, 2015|Broker Check, FINRA, Press Releases & News|
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