The state of Massachusetts has charged Realty Capital Securities, LLC with fabricating shareholder proxy votes.
According to the complaint filed on Thursday, Massachusetts Secretary of the Commonwealth William Galvin seeks to revoke RCS’s broker-dealer registration in the state for alleged fraudulent actions, including fabricating shareholder votes by having RCS employees masquerade as shareholders to cast proxy votes in favor of investment programs sponsored by AR Capital. Galvin is also seeking to impose an administrative fine on the company and a cease and desist order.
Galvin’s complaint stated, “In an era of expansive and complex corporate structures, a shareholder’s right to vote by proxy is a sacrosanct right to participate in the democratic process of the capital markets…Realty Capital Securities, a Massachusetts-registered broker-dealer, eviscerated this fundamental right of shareholders.”
The complaint alleges that Galvin’s office has identiﬁed at least two fabricated shareholder proxy votes for AR Capital’s Business Development Corporation of America, an investment fund distributed by RCS on behalf of AR Capital, companies founded by and managed by Nicholas Schorch and/or his partners. Allegedly, a registered representative of RCS placed a telephone call to a contracted proxy solicitation ﬁrm while another registered representative, using a phony accent, impersonated a shareholder and voted in favor of a BDCA proposal. Another similar scenario allegedly took place for the 2015 BDCA Special Meeting of Stockholders vote.
The DI Wire will continue to track and report on this and other ARC-related news.