Vereit Inc (fka VER)

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LPL, AIG Advisor Group broker-dealer network putting the brakes on sales of Schorsch-linked nontraded REITs

After accounting error at ARCP found, 10% of registered reps who could sell real estate maven's products on hold


Nov 4, 2014 @ 8:42 am

By Bruce Kelly


Two major independent broker-dealers, LPL Financial Holdings and the AIG Advisor Group network, have cut ties, at least for now, with REITs associated with Nicholas Schorsch, the embattled chairman of a sprawling real estate investment empire.

LPL, the largest independent U.S. broker-dealer with nearly 14,000 advisers, said Tuesday it would no longer sell products by American Realty Capital Properties Inc. and RCS Capital Corporation “and their respective affiliates.”

AIG Advisor Group, with four broker-dealers that house 6,000 registered representatives and advisers, told its sales force Monday that it was suspending sales of two nontraded real estate investment trusts, the American Realty Capital New York City REIT Inc. and the Phillips Edison-ARC Grocery Center REIT II.




With the loss of access to AIG Advisor Group reps, Mr. Schorsch has so far said good-bye for now to almost 11,700 registered reps who potentially would sell his products. That accounts for roughly 10% of the registered reps who are counted as advisers at independent-contractor broker-dealers

Realty Capital Securities is the wholesaling broker-dealer for both REITs. Mr. Schorsch is the executive chairman of that company's parent, RCS Capital Securities Corp.

(Related: Two Schorsch companies at odds over $700M deal)

A spokeswoman for AIG, Linda Malamut, confirmed that the AIG Advisor Group had temporarily halted the sale of two Schorsch nontraded REITs. When asked to explain why, Ms. Malamut said: “We have no further comment at this time.”

“RCAP has strong relationships with our broker-dealers and we are working closely with those who have requested clarity on recent events,” Andy Backman, a spokesman for the company, said in an email. “Based upon our discussions, it is evident that broker-dealers understand the value of RCS distributed products and are eager to work aggressively with us to resolve any outstanding questions.”

AIG's move comes as Mr. Schorsch faces withering scrutiny after news broke last Wednesday that the traded REIT he controls, American Realty Capital Properties Inc., had made a $23 million accounting error that resulted in the firing of its chief financial officer.

AIG Advisor Group is the latest broker-dealer network to halt sales of Schorsch REITs.

Securities America Inc., with 1,772 registered reps and advisers, confirmed Friday it had temporarily suspended sales of two American Realty Capital-related REITs: the Phillips Edison-ARC Grocery Center REIT II and Cole Capital Properties V.

Also last week, the four broker-dealers in the National Planning Holdings Inc. broker-dealer network informed its 3,954 registered reps and advisers that it was “temporarily suspending nontraded REITs sponsored or distributed by [American Realty Capital] and its affiliated companies.”