Schorsch Buys Three Independent Broker-Dealers in Less Than a Year

Schorsch Buys Three Independent Broker-Dealers in Less Than a Year

Moving at a pace that will soon make him a strong competitor with industry giants LPL and Ameriprise Financial, real estate investor Nicholas Schorsch has purchased five independent brokerage firms since June, 2013.  In June, Schorsch announced the purchase of First Allied Holdings for an undisclosed amount.  In October and November, he announced his intention of purchasing Investors Capital Holdings, Inc. and Summit Financial Services Group, Inc.

Finally, less than a week ago, Schorsch announced that he would acquiring Cetera Financial Group for $1.15 billion and J.P. Turner & Co. for $27 million.  All of these acquisitions make Schorsch’s firm, RCS Capital Corp., second to only LPL in registered representatives and financial advisors and third to LPL and Ameriprise in total revenue.

As the attorneys at Peiffer Rosca know, the firms Mr. Schorsch are acquiring are not without certain regulatory problems.  In fact, Peiffer Rosca has handled, or is handling, cases against three of the five brokerage firms that Schorsch has acquired or intends to acquire.

The cases involving the recently acquired brokerage firms include many of the typical regulatory issues Peiffer Rosca sees.  One involved allegations of REIT abuses and an over concentration in risky products like inverse and leverage exchange traded funds sold to the majority of the broker’s clients, many of which were retirees.

Another involved allegations of soliciting investments in an outside business that the broker was involved in that turned in to a Ponzi scheme.  The third also involved allegations of outside business activities, but also included strong evidence of churning and unsuitability.  In each case, the broker had a history of customer complaints and regulatory issues that were seemingly ignored by the firm.  The firms denied the allegations.

It will be interesting in the future to see how Schorsch’s new, and suddenly very large, firm handles its compliance responsibilities.  Having close to 9,200 registered representatives and financial advisers generating $1.73 billion in total annual revenue is great, but it comes with a responsibility to the investing public to ensure that securities law and regulations are not violated.

As Schorsch’s competitor LPL learned after its acquisition of numerous independent brokerage firms, living up to that responsibility becomes more and more difficult (and expensive) as the firm employs more and more advisers throughout the country.  Schorsch may find it even more difficult given the issues the acquired firms have already had.

As noted above, the attorneys at Peiffer Rosca have experience handling cases against three of the five firms Schorsch recently acquired.  Investors who believe they have lost money as a result of broker misconduct may contact attorneys Joe Peiffer or Alan Rosca for a free, no-obligation consultation, toll free at 888-998-0520.