A securities class action suit was recently filed on the behalf of RCS Capital Corporation shareholders.
Based in New York City, RCS Capital Corporation is a full-service investment firm that specifically caters to retail investors. The company's website indicates that the organization operates several subsidiaries, including wholesale distribution, retail advice services, crowdfunding, investment banking and capital markets and investment research.
Rosen Law Firm suit
On Dec. 29, 2014, The Rosen Law Firm indicated that it had filed a purported shareholder class action lawsuit representing individuals and organizations that bought company securities between Feb. 12, 2014, and Oct. 31, 2014.
The securities class action suit alleged that the company misled investors when it neglected to reveal several key matters. The lawsuit was filed in an effort to recover investment losses suffered by RCS Capital investors under existing federal securities laws.
Pomerantz LLP legal action
On Dec. 29, 2014, Pomerantz LLP announced the filing of a shareholder class action lawsuit on the behalf of all organizations or individuals who bought the full-service investment firm's securities between Feb. 12, 2014, and Oct. 31, 2014. These dates are inclusive, and represent the class period.
This lawsuit, which was brought forth in the United States District Court, Southern District of New York and docketed under 14-cv-10136, was launched in an effort to recover damages from defendants for alleged breaches of federal securities laws under the Securities Exchange Act of 1934.
The securities class action suit brought forth by Pomerantz LLP claimed that during the aforementioned class period, defendants provided statements about the company's prospects for future acquisition and business that were materially false and misleading.
Securities class action allegations
According to the lawsuit filed by The Rosen Law Firm, the company misled investors by neglecting to reveal several key matters that pertained to its announced acquisition of Cole Capital from commercial real estate investment trust American Realty Capital Properties.
The suit claimed that the full-service investment firm failed to disclose that serious accounting fraud existed at ARCP, and that chairman Nicholas Schorsch should have been aware of this. In addition, the legal action alleged that the statements the company made about its plan to buy Cole Capital, as well as the statements it made about its anticipated profitability, were false and misleading.
Finally, the lawsuit claimed that the accounting fraud at ARCP might negatively impact the expected revenue stream RCS Capital brought it because of its relationship with the commercial REIT.
The lawsuit brought forth by Pomerantz LLP provided some additional details in its allegations, claiming that ARCP's senior management, including Schorsch, put a large accounting scandal in place and then covered it up, which resulted in the commercial REIT providing financial statements that were materially false and misleading.
In addition, the Pomerantz LLP suit alleged that at all relevant times, the statements RCS Capital made about its financial position – in addition to those surrounding the acquisition of Cole Capital – were materially false and misleading.
Errors revealed
On Oct. 29, 2014, ARCP revealed that its financial statements were materially false and inaccurate, and would need to be restated. Further, the commercial REIT revealed that it was aware that its reports contained errors, and intentionally failed to correct them. Following this revelation, both the company's chief accounting officer and chief financial officer resigned from their positions at the firm.
In addition, it was reported that the FBI launched a criminal investigation into the ARCP.
Falling shares
RCS Capital announced on Nov. 3, 2014, that it had severed its previously-revealed definitive agreement to buy Cole Capital from ARCP. On that day, share of RCS Capital fell more than 16 percent to close at $13.69 each.
The Pomerantz LLP lawsuit noted that after the close of trading on Nov. 7, 2014, Thinkadvisor.com reported that William Galvin, secretary of the commonwealth in Massachusetts, had launched an investigation into RCS Capital that involved the accounting errors that were revealed at ARCP. When markets found out about this latest development, shares of RCS Capital dropped more than 5.7 percent to close at $10.67 on Nov. 10, 2014.
ARCP announced in a statement on Dec. 15, 2014, that Schorsch had resigned as its executive chairman and director. During the trading session, company shares fell more than 11 percent to finish the day at $10.46 apiece.
Information for investors
Both of the law firms that filed the respective legal claims provided information that eligible investors can use. Pomerantz LLP stated that investors who bought company securities during the class period, and want to serve as lead plaintiff, can move the court before Feb. 27, 2015. In addition, those who want to discuss the securities class action suit further can contact Robert Willoughby.
The Rosen Law Firm provided additional information, specifying that no class had yet been certified in the lawsuit it had filed. As a result, eligible investors are not represented by counsel unless they hire a lawyer. Organizations and individuals in this situation can hire a lawyer of their choosing, or alternatively, can be an absent class member.