DENVER -- With investors aghast at the turmoil within his financial empire, RCS Capital Executive Chairman Nicholas Schorsch insisted that he and fellow executives immediately addressed the firestorm, but maintained they didnt overreact.
Nonetheless, Schorsch speaking to a room full of advisors at the Schwab Impact conference who had come to hear him speak about nontraded REITs and other alternative investments tried to downplay the fallout on Wall Street, where shares of RCS have plunged more than 70% from their 52-week high. Our stock has been beat up a little bit lately, he acknowledged.
Although Schorsch claimed that the healing process has begun, he conceded that it will take some time to restore normalcy to American Realty Capital Properties and RCS, which are feuding openly after RCS abruptly terminated a deal with American Realty to buy Cole Capital.
ACCOUNTING SCANDAL
American Realty, embroiled in a $23 million accounting scandal that resulted in the dismissal of the companys chief financial officer and chief accounting officer and has put the companys nontraded REIT business in the spotlight, is not part of RCS, although Schorsch is the top executive at both companies.
Earlier in the day, RCS, the country's second-largest independent broker-dealer by advisor headcount, issued an extraordinary statement emphasizing that it and American Realty Capital are "two separate and independent public corporations."
After his talk to advisors, in which the problems at his companies seemed almost an afterthought, Schorsch promised several reporters he would discuss the problems at his companies in the conferences exhibit hall, but then quickly changed his mind, deferring to other RCS executives.
LPL REJECTION
One of the major fallouts of the scandal has been a decision by LPL Financials decision to indefinitely suspend sales of investment products sponsored by American Realty, RCS and their affiliates.
LPLs move, RCS Chief Executive Michael Weil told Financial Planning, was a not unreasonable pause given the circumstances. Weil said he regularly talks to LPL management and appreciates their support as we clear up issues in the market.
(RCS Cetera Financial Group network of independent broker-dealers, which Schorsch acquired in January, has also told its 9,200 advisors to restrict stock sales for both RCS and American Realty, according to a Wall Street Journal report).
Potential acquisitions by RCS, which has been on an unparalleled advisory industry buying spree the past two years, have not been affected by the controversy, Weil maintained.
Former LPL executive Bill Dwyer, now CEO of RCS Realty Capital Securities, told Financial Planning he believed the substantial attention the story has received would not tarnish RCS or diminish investors appetite for REITs as an alternative investment.
The current controversy would only be a speed bump, he predicted, as alternative investments continued to record enormous growth."
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