Independent broker dealers are suspending sales of products from the sprawling Schorsch empire after a $23 million fraud was uncovered at one of its subsidiaries.
The CFO of American Realty Capital Properties was fingered but now the ARCP REIT as well as offerings from the Shorsch parent company are in the penalty box.
Financial advisors are unforgiving, as I explained to ThinkAdvisor:
“… the scandal has tarnished the entire Schorsch brand. In other words, although these are two separate corporate entities, their brands are linked in terms of their public image,” said executive-search consultant Mark Elzweig, in an interview.
“This is unfortunate,” Elzweig said, “considering that ARCP had built up a very strong brand and strong relationships with advisors who valued what the company had brought to the non-traded REIT niche”
Cambridge Research is the latest firm to announce that it’s halting sales of three ARCP products. Understandably, RCS Capital issued a press release in which it emphasized that it and ARCP are “separate and independent public corporations” with different management.
Given how many IBD’s imploded in recent years due to unintentional sales of fraudulent private placements like Provident Royalties and Medical Capital, it doesn’t take much to start a stampede.
