A stepped-up SEC exam now underway at Girard Securities is routine and unrelated to problems affecting the reputation of the independent broker-dealer's future parent RCS Capital, says Susie Woltman-Tietjen, Girard's chairman and CEO. RCS is awaiting FINRA approval on its acquisition of Girard.
"It has nothing to do with RCAP. It is not extraordinary," says Woltman-Tietjen, the daughter of the founder Richard Woltman.
News of the exam emerged as troubles continue for another firm founded by RCS Capital's former executive chairman Nicholas Schorsch. Schorsch has been accused of ordering a $23 million accounting error that his REIT operation, American Realty Capital revealed it deliberately left uncorrected. Following the revelation, Schorsch stepped down as executive chairman of RCS.
The firm Grant Thornton also resigned as auditor of a number of American Realty REITs. RCS Capital now owns nine IBDs and is in the process of closing deals to buy two more, including Girard.
The SEC's exam priorities for 2015 include increased scrutiny of offices of supervisory jurisdiction and oversight of registered representatives, Woltman-Tietjen says, adding, "It's one of their initiatives."
She says she wrote a memo to her firm's reps letting them know the exam would place extra demands on their time.
"Every month we have a communication that goes to the advisors and I alert them to things that are out of the ordinary and things that are ordinary," she said. "I felt that I owed the reps a heads-up that they would be getting requests from us for information."
However, at least one other IBD leader says he hasn't noted changes in the SEC's exam priorities this year.
"[I]n reviewing the SECs recent exam priority letter, we did not find anything that was news to us," says Wayne Bloom, CEO of Commonwealth Financial Network. "For example, we have long since conducted regular and routine office examinations at our branch locations, have processes and procedures in place to ensure fee-based managed accounts are appropriate for those clients to whom such services are made available, and have implemented special training and oversight protocols for the use of complex products."
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