No surprise independents putting Schorsch in penalty box

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.

 

 

 

 

 

About Mark Elzweig

I am an executive search recruiter with an inside track on financial advisors, the asset management industry, and Wall Street. My work has appeared in numerous publications including On Wall Street,AdvisorOne, and Fund Fire. Journalists regularly seek me out, so you catch my bon mots in The Wall Street Journal, Research Magazine, Reuters, and more. You can follow me on Twitter @elzweig or you can reach me directly at 212-685-7070 or elzweig@elzweig.com.
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2 Responses to No surprise independents putting Schorsch in penalty box

  1. Jim Eccleston says:

    Timely and informative as always!

    Mark, do you think the rep exodus will be limited to Cetera, or will it extend to the other entities he bought too like Cole, Investors Capital and First Allied?

    We are reaching out to Cetera reps to let them know we can help with the transition.

    Thanks. Jim

    Sent from my Verizon Wireless 4G LTE smartphone

  2. Mark Elzweig says:

    Thanks Jim. The longer this issue drags on until it’s resolved, the more advisors will leave. This will be the case with acquired firms as well.

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