Massachusetts Secretary of the Commonwealth, William Francis Galvin, is investigating Realty Capital Securities, the wholesaling firm for Schorsch’s publicly-traded holding company, RCS Capital (NYSE: RCAP) (RCAP).
The news comes at a time when the Schorsch Empire has been undergoing scrutiny for a $23 million accounting error and intentional cover-up by publicly-traded American Realty Capital Properties (NASDAQ: ARCP) (ARCP) of which Schorsch is Chairman.
Although an unaffiliated entity from RCAP, the ARCP accounting mess has caused RCAP owned entities including its broker-dealer network Cetera Financial Group and SC Distributors, a wholesale distributor of alternative investments, to issue statements emphasizing their independence from ARCP. Many broker-dealers, including Cetera, LPL, and Securities America, among others, have put the brakes on offering Schorsch related offerings sponsored by AR Capital, another Schorsch owned entity, and Cole Capital, which is owned by ARCP.
RCAP even went so far as to cancel an acquisition deal with Cole Capital, ARCP’s private capital management business and sponsor of non-traded REITs.
According to reports, Realty Capital Securities will be investigated in regards to information it provided to REIT investors, including accounting information, but further information remains vague.
Brian McNiff, a spokesperson for Secretary of the Commonwealth Galvin, confirmed that the investigation of Realty Capital Securities is underway. “It’s been going on for a while but I really can’t divulge any more information,” he stated.