Talk about one hand not talking to the other: The advisory arm of Nick Schorsch's empire is trying to distance itself from his nontraded REIT business.
After a week of bad news including accounting errors and a deal collapse, RCS Capital, which is now the country's second-largest independent broker-dealer by advisor count, issued a statement Wednesday morning emphasizing that it and American Realty Capital are "two separate and independent public corporations."
"Given the corporate announcements made by American Realty Capital Properties, ... and the effect those announcements have had on RCAPs market valuation, RCAP would like to clarify its relationship with ARCP," says the statement by RCS Capital, which trades under the ticker RCAP.
"RCAP and ARCP have no overlapping members of management," the statement continues. "Furthermore, the employees at ARCP accused of wrongdoing are not employed by RCAP."
The two publicly traded companies are separate entities, although Schorsch has a controlling interest in both. The firms' websites list him as co-founder, chairman and CEO of American Realty Capital, and executive chairman at RCS.
The two firms also "have independent accounting teams and accounting and control systems with no overlap," the statement says.
RCS Capital appears to be making other attempts at damage control as well. Its Cetera Financial Group network of IBDs, which Schorsch acquired in January, has told its 9,200 advisors to restrict stock sales for both RCS and American Realty Capital, according to a Wall Street Journal report. (A Cetera spokesperson did not return a call asking for confirmation.)
And over the weekend, RCS abruptly terminated an agreement to buy Cole Capital from American Realty Capital.
Schorsch's empire has taken a hit to its reputation, if not its bottom line, as other independent B-Ds have gone public with their plans to avoid its products, in the wake of the disclosure that American Realty Capital left roughly $23 million in accounting errors uncorrected.
In the latest blow, the country's largest independent B-D, LPL Financial, announced on Tuesday that it was "indefinitely suspending" sales of investment products sponsored by either Schorsch company.
RCS said in Wednesday's release that it has a positive dialogue with its broker-dealer and custodian networks. "RCAP is providing the broker-dealer/custodian network the information they are requesting in order to maintain our distribution relationships," the statement says. "We believe those broker-dealers that have temporarily suspended sales are likely to reinstate the selling agreements."
RCS is scheduled to release its third-quarter earnings on Nov. 13.
- Schorsch's American Realty: Financial Statements Inaccurate, 2 Execs Ousted