RCS Capital really wants the industry to know that things are back on track after a recent accounting scandal. It just doesn't want to provide any details.

The Nicholas Schorsch-run company, which includes his independent broker-dealer operation, issued a press release Monday asserting that "certain broker-dealers" have resumed sales of products distributed by Realty Capital Securities, the company's wholesale distribution business -- but it declined to name any of the broker-dealers.

According to RCS, 51 selling agreements have been reinstated, and the company is working with over 250 firms to distribute alternative products, REITs being the most prominent. RCS did not say how many selling agreements remain suspended.


The announcement is the latest chapter in the ongoing soap opera that has enveloped the Schorsch empire since accounting irregularities totaling nearly $23 million were uncovered at fellow Schorsch company American Realty Capital Properties last month.

That revelation set off a chain reaction in which a number of major independent broker-dealers, including LPL Financial, suspended sales of some nontraded American Realty REITs. LPL, the nation's largest IBD, has not resumed selling products distributed by Realty Capital Securities, according to a spokesman.

The Wall Street Journal also reported that RCS' largest independent broker-dealer subsidiary, Cetera Financial Group, had stopped selling products distributed by RCS' wholesale arm -- but Cetera CEO Larry Roth denies that.

RCS and its subsidiaries are now being scrutinized by the SEC, FINRA and state securities regulators, including Massachusetts.


Despite the flood of negative news, Cetera is continuing to invest in organic growth and Cetera advisors have not expressed concerns about the parent company, according to Roth, the industry heavyweight who was hired by Schorsch from AIG's Advisor Group last year.

When the news about the accounting scandal and RCS's subsequent decision to cancel a business deal with ARCP first broke, advisors were initially confused about "which firms were involved," Roth says.

After being reassured that their clients' "investment programs were still healthy," Cetera advisors haven't been asking questions about the company's health, according to Roth.


Meanwhile, RCS is receiving support from senior executives and some big-name investors.

The company has disclosed several executive purchases of company stock, which has declined approximately 40% year-to-date: Bill Dwyer, the CEO of Realty Capital Securities, purchased 42,000 shares; RCS Capital CEO Michael Weil, chief financial officer Brian Jones and chief operating officer Brian Nygaard bought an aggregate of 33,350 shares of RCS Capital common stock; and John Grady, RCS Capital's chief strategy and risk officer, bought 3,815 shares.

"The recent purchase of RCS Capital shares by management underscores our firm belief that the company's current market valuation does not properly reflect the fair value of the business's robust fundamentals, earning power, growth prospects and significant competitive advantages," Weil said in a statement.

Two major investors apparently agree.

Steven Cohen, the billionaire former hedge fund manager who now invests through his family office, Point72 Asset Management, last week raised his stake in RCS to 5.1%.

And Luxor Capital Group, the $3 billion hedge fund managed by Christian Leone, has increased the number of RCS shares it holds, although its stake remained unchanged at 9.9% of the company’s class A stock.

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