AR Capital Axed by RCS, Fidelity and Schwab
Realty Capital Securities, RCS Capital Corporation’s (NYSE: RCAP) wholesale broker-dealer and distributor of non-traded direct investment programs, suspended dealer manager agreements with six AR Capital-sponsored offerings.
According to a memorandum distributed to independent broker-dealers and their registered representatives that was provided to The DI Wire by an anonymous source, the following AR Capital-sponsored offerings will no longer be distributed by Realty Capital Securities:
• American Realty Capital Hospitality Trust,
• American Realty Capital Healthcare Trust III,
• Business Development Corporation of America II,
• American Realty Capital New York City REIT II,
• American Realty Capital Global Trust II, and
• Realty Finance Trust
The company cited due diligence concerns, stating “pending the receipt and review of due diligence information requested of AR Capital on November 16, 2015, Realty Capital Securities has elected to suspend sales activities it performs pursuant to the dealer manager agreements currently in effect…”
United Development Funding Income Fund V is not included in the suspension list.
Realty Capital Securities notified each of its selling group members and financial advisors of the suspension, and indicated that they will notify all third party due diligence firms and clearing and custody firms of the suspensions.
Yesterday, Fidelity National Financial and Charles Schwab & Co. Inc. announced their intentions to sever ties with AR Capital.
Fidelity spokesperson, Nicole Abbott, said in a statement, “Effective November 19th, Fidelity will no longer facilitate new purchase subscriptions for certain Realty Capital Securities distributed REIT and BDC products.”
Similarly, Schwab spokeswoman Susan Forman, stated “Effective November 20th, Schwab is suspending purchases of interests in non-listed AR Capital products. Existing positions in these funds will continue to be serviced and maintained by Schwab in accordance with our normal servicing standards.”
Realty Capital Securities will continue to sell offerings distributed by SC Distributors and alternative investment funds provided by Hatteras Funds, which are both owned by RCS Capital Corporation, including:
• Alpha Hedged Strategies Fund (Hatteras)
• Alternative Multi-Manager Fund (Hatteras)
• Managed Futures Strategies Fund (Hatteras)
• Disciplined Opportunity Fund (Hatteras)
• Long/Short Debt Fund (Hatteras)
• Long/Short Equity Fund (Hatteras)
• Market Neutral Fund (Hatteras)
• Wildermuth Endowment Strategy Fund
• United Development Funding Income Fund V
• Carter Validus Mission Critical REIT II
• Greenbacker Renewable Energy Company
• Sierra Income Corporation
• TriLinc Global Impact Fund
Earlier this week, Larry Roth replaced Michael Weil as chief executive officer of RCS Capital Corporation. Roth is also the CEO of Cetera Financial Group, which suspended sales of all AR Capital-sponsored investment offerings through their entire broker-dealer network, including First Allied Securities, Girard Securities, Investors Capital, VSR Financial Services, and The Legend Group.
The suspension of the dealer manager agreements comes on the heels of the announcement by AR Capital on Monday that they would end their non-traded offerings at the end of 2015 and exit the business.
A spokesman for Realty Capital Securities could not be reached for comment.
