Pomerantz LLP has filed a class-action lawsuit against RCS Capital Corporation (RCAP) and certain of its officers on behalf of a class consisting of all persons or entities who purchased RCS Capital securities between Feb. 12 and Oct. 31.
"If you are a shareholder who purchased RCS Capital securities [between Feb. 12 and Oct. 31], you have until February 27, 2015 to ask the Court to appoint you as Lead Plaintiff for the class," the law firm stated in a news release.
The class action, filed in U.S. District Court, Southern District of New York, seeks to recover damages against defendants for alleged violations of the federal securities laws under the Securities Exchange Act of 1934.
The complaint alleges that throughout the period, RCS Capital "made materially false and misleading statements regarding the company's business and future acquisition prospects."
Pomerantz lists four reasons for its allegation:
1. American Realty Capital Properties, Inc.'s (ARCP) financial statements were materially false and misleading as a result of a massive accounting scandal perpetrated and concealed by senior management, including Nicholas Schorsch;
2. RCS Capital's announced acquisition of Cole Capital from ARCP was at serious risk due to the fraud being perpetrated at ARCP;
3. RCS Capital's revenue stream from its relationship with ARCP was in jeopardy as a result of the accounting scandal at ARCP; and as a result of the foregoing,
4. RCS Capital's public statements pertaining to its financial position as well as the Cole Capital acquisition were materially false and misleading at all relevant times.
At the end of October, accounting errors were disclosed at American Realty Capital Properties Inc. ARCP reported on Oct. 29 that it had found accounting errors that were intentionally concealed, leading to the resignations of its chief financial officer and chief accounting officer.
Pomerantz points out that shares of RCS Capital fell $2.72, or more than 16%, on extremely heavy volume, to close at $13.69 on Nov. 3 – after the company backed out of a deal to buy Cole Capital from ARCP for $700 million. (In early December, RCS Capital settled with ARCP in a deal worth $60 million).
After news broke on Nov. 7 that Massachusetts regulator William Galvin had started an investigation of Realty Capital Securities, which conducts the wholesaling work of RCS Capital, Pomerantz points out that the shares of RCS Capital fell $0.65, or more than 5.7%, on heavy volume, to close at $10.67 on Nov. 10.
