A federal judge has confirmed the bankruptcy plan for RCS Capital, Cetera Financial Group’s parent, clearing the way for RCS to emerge from Chapter 11 bankruptcy protection in the near future.

"All requirements for confirmation of the plan have been satisfied," Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., ruled.

Her decision marks the beginning of the end of a nightmare for most of the 9,000 Cetera brokers who were snapped up in an acquisition spree over the past several years by RCS' former executive chairman and nontraded REIT kingpin Nicholas Schorsch.

Cetera headquarters

An accounting scandal in another Schorsch-run firm had contributed to the collapse and delisting of RCS stock, causing an unknown number of Cetera advisers personal losses that ranged up to the six figures, and possibly higher.


But while Walrath's decision drew praise and expressions of relief from some, Cetera's near-simultaneous decision this week to shutter two of its smaller independent broker-dealers, VSR Financial and Investors Capital, led advisers in those firms to accuse Cetera of betraying the loyalty they displayed throughout the bankruptcy process, says Jodie Papike, executive vice president of recruiting firm Cross-Search in Encinitas, Calif.

Cetera announced its decision to shutter the firms and offer berths at its larger subsidiaries to only a select number of advisers from both firms.

Read more: Cetera taps ex-LPL president Moore as chairman; to shutter VSR, ICC

"These advisers have been put through the ringer, especially the VSR advisers," according to Papike, who says there are about 650 advisers between VSR and Investors Capital. "Many of them had VSR stock and when they were acquired they were given RCS stock. Now [Cetera is] saying, 'Oh, by the way, your firm is gone and you may or may not be able to join another firm in our network.'

"There's been a sense of betrayal for a long time," she added.

Yet in the wake of the Department of Labor’s new fiduciary rule, many experts have been warning that smaller firms throughout the IBD space face risks that favor large firms with scale and deeper pockets.

Dan May, a Cetera regional leader and president of AdviserNet Financial in Minneapolis, says Cetera needs to maintain high standards.

"I like the fact that Cetera is going to be selective as to who they invite on board," May said.

Most Cetera advisers are happy the plan was approved, he added.

"I know our advisers are moving forward," May said. "We are anxious to have this chapter of our lives behind us."


Retirements benefits for Cetera advisers will be unaffected, putting to rest a concern held by some planners in recent months.

"All retiree benefits … shall continue to be paid in accordance with applicable law," Walrath wrote.

David Orlofsky, chief restructuring officer, RCS Capital

In regards to the approval of the plan, David Orlofsky, RCS's chief restructuring officer, said in a statement:

"We're excited by this final step towards the company's successful exit from the Chapter 11 process, and its emergence as a Cetera-only organization that is privately owned, independently managed, and well-positioned for long-term success in serving financial advisers and financial institutions. We expect formal emergence from the restructuring process to follow soon, at which time Cetera will have further public comment."