On Thursday, October 30, National Planning Holdings Inc. (NPH), a group of four broker-dealers, informed their nearly 4,000 registered representatives and advisers that it is putting a temporary halt on sales of non-traded REITs (real estate investment trusts) connected to Nicholas Schorsch’s American Realty Capital Properties (ARCP) and its affiliates. This announcement came on the heels of ARCP’s revelation last Wednesday that some $23 million in accounting discrepancies from the first half of the year had been uncovered. ARCP has removed its chief financial and chief accounting officers in response to these errors which, according to the company, were purposely not corrected.
The announcement came in the form of a memo from Steve Dowden, president, and chief executive of INVEST Financial Corp., one of the four broker-dealers in NPH. The memo stated that the decision to halt sales of non-traded REITs only affects the Phillips Edison — ARC Grocery Center REIT II, a relatively small REIT with $207 million in assets. In addition, NPH requested that Realty Capital Securities, the wholesaling broker-dealer for ARC, not process new business and return unprocessed sales orders. Furthermore, the memo instructed brokers to no longer solicit trades in ARCP and three other companies connected to Mr. Schorsch. The restriction will be in effect until NPH fully assesses the situation to its satisfaction. Finally, NPH asked ARC to cease reinvesting dividends on the ARC non-traded REITs affected by the new policy, and also indicated that NPH would take a second look at the restriction on the trading of ARC related stocks.
The Stock Market Reacts, the FBI Announces an Investigation
In the wake of last week’s news, shares of ARCP stocks fell 36% by week’s end, and continued to fall on Monday after RCS Capital Corp. announced its decision to terminate a $700 million deal to purchase Cole Capital Advisors Inc. from American Realty Capital. Furthermore, the FBI announced on Monday that it has opened a criminal probe of ARCP. This is in addition to an investigation planned by the Securities and Exchange Commission into the accounting errors and apparent cover-up.
Vernon Litigation Group Fights for Defrauded Investors
If you are a shareholder of American Realty Capital Properties or in any way suspect you may have lost money as a result of these recent revelations, the team of securities litigation attorneys at Vernon Litigation Group is here to assist you in recovering whatever losses you may have incurred. Call us toll-free at (239) 319-4434 or email us at email@example.com to schedule a free consultation with one of our experienced securities fraud lawyers.