December 2, 2015 / 9:56 PM / 5 years ago

RCS Capital unit to close, pay $3 million fine to Massachusetts

Dec 2 (Reuters) - A brokerage firm tied to real estate investor Nicholas Schorsch has agreed to wind down its wholesale distribution business and pay $3 million to resolve claims by Massachusetts’ securities regulators that it fraudulently cast shareholder proxy votes.

RCS Capital Corp said Wednesday that as part of a settlement with Massachusetts Secretary of the Commonwealth William Galvin, it would terminate its registration nationally for the business, Realty Capital Securities.

The settlement raises questions about the fate of the $6 million deal announced last month in which RCS Capital agreed to sell the wholesale distribution business to private equity firm Apollo Global Management. Apollo declined comment.

Mark Auerbach, RCS Capital’s nonexecutive chairman, in a statement said the decision to wind down the wholesale business “was essential to our continuing efforts to create a leaner, more efficient organization.”

Schorsch, RCS Capital’s largest shareholder, was its chairman until last year, when he resigned from its board and others after his real estate investment trust American Realty Capital Properties Inc disclosed accounting errors.

Wednesday’s settlement came after Galvin on Nov. 12 filed an administrative case against Boston-based Realty Capital Securities alleging that employees masqueraded as shareholders to cast proxy votes in favor of management proposals.

Those votes concerned Business Development Corporation of America, an investment program sponsored by Schorsch’s American Realty Capital, or AR Capital, regulators said.

A September proxy vote was a prerequisite for a deal with Apollo to buy real estate assets from Schorsch, regulators said.

While that $19 billion deal collapsed, Apollo’s deal to buy Realty Capital Securities went forward at a reduced asking price, regulators said. (Reporting by Nate Raymond in New York; Editing by Diane Craft)

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