RCS Capital (RCAP) said Monday that it was setting up a crowdfunding investment platform with the assets — and management — it is acquiring from Trupoly, an investor relations portal.
RCS, led by Executive Chairman Nicolaus Schorsch and known for nontraded REITs and other products, plans to launch the new alternative investment program — We R Crowdfunding — in September.
Is this a savvy move for RCAP?
"This acquisition is a logical diversification for RCS, which is already involved in alternatives, especially real estate," said Mark Elzweig, an executive search specialist and financial services expert, in an interview. "In our social media era, crowdfunding investments are considered by many to be cutting edge."
Plus, notes Elzweig, many advisors — especially those with a strong base of high-net-worth clients — are hungry for new products. "Advisors are always looking for unique and worthwhile alternative investments to attract the attention of HNW investors," said the president of Mark Elzweig Co., in New York. "If Trupoly's offerings are solid ones, they will be a welcome addition to the RCS platform."
Crowdsourced investing got off the ground as part of the 2012 Jumpstart Our Business Startups (JOBS) Act, which gave the SEC the ability to relax rules prohibiting the general solicitation of investments.
The JOBS Act of 2012 included two provisions for crowdfunding. Title II, which came into effect in 2013, governs entrepreneurs and lets companies publicly share and advertise that they are looking for investments. Title III would allow companies to raise capital from non-accredited investors and has been mired in an SEC review of more than 500 proposed rules related to Regulation A since last October.
Earlier this year, SEC Chairwoman Mary Jo White said this was one of the agency's priorities. "I expect that the commission, after thorough consideration of all comments, will move expeditiously to finalize these rules," White noted at the time.
According to RCAP, a 2013 World Bank study estimated that crowdfunding investments could become a $300 billion annual market in the U.S. over the next decade.
"We expect We R Crowdfunding to provide investors [with] direct access to public and private offerings, including Regulation A and Regulation D offerings, mutual funds and closed-end fund offerings, in a variety of industries and sectors," said RCAP President Michael Weil, in a press release.
As part of the deal, Trupoly founder and President Ryan Smith, head of sales Charles Crnoevich and client-relationship manager Melanie Eitel will be joining RCAP.
"We are pleased to be joining the RCAP team and look forward to creating the market leader in direct-to-consumer investment offerings," said Smith, in a statement.
RCAP wrapped up its purchase of the alternative-fund group Hatteras Funds (which has some $2.7 billion in assets under management) on July 1 and its acquisition of Investor's Capital (which includes about 450 independent advisors) on July 11.
