According to InvestmentNews, Massachusetts secretary, William Galvin, is investigating how Realty Capital Securities sold nontraded REITs. Mr. Galvin’s office includes the Massachusetts securities division and is specifically looking at what information investors received when they bought the REITs.
Mr. Galvis’ investigation follows the FBI’s inquiry into an accounting error by the REIT, American Realty Capital Properties (ARCP). Nicholas Schorsch is a chairman of ARCP and was the CEO of ARCP until Oct 1. Schorsch is also an executive chairman of RCS Capital, the broker-dealer holding company of Realty Capital Securities and the CEO of American Realty Capital (ARC).
According to investmentNews, American Realty Capital is trying to distance themselves from ARCP. Several ARC Reits updated filings with the Securities and Exchange Commission emphasize that they are separate entities from ARCP. For example, American Realty Capital Global Trust II emphasised that they are not affiliated with ARCP and have independent accounting teams.
Reports suggest that the $23 million ARCP accounting error was intentionally uncorrected. The mistake led to the resignation of the company’s chief account officer and chief financial officer. Given that the error was allegedly “intentional,” it is not surprising that ARCP is under the scrutiny of the FBI and State Regulators.
REITs are generally considered complex, high-risk securities products. As such, many states, including Massachusetts, have set guidelines specific to REIT sales. Broker dealers that sell REITs have a responsibility to make investment recommendations that are consistent with the investors risk tolerance, financial objectives, investment experience and net worth. When broker dealers fail to make suitable investment recommendations they may be liable for investment losses.
If purchased a REIT and have suffered losses,The White Law Group may be able to help. If you would like to discuss your litigation options, please contact The White Law Group at (312)238-9650 for a free consultation.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.
To learn more about the firm, please visit www.WhiteSecuritiesLaw.com.