Articles Tagged with preferred stock

shutterstock_175993865The securities lawyers of Gana Weinstein LLP are investigating investors that were recommended to invest in preferred stock issued by RCS Capital Corporation (RCS). According to the Wall Street Journal, RCS Capital plans to file for chapter 11 bankruptcy protection under a prearranged that will allow RCS to focus on its retail brokerage firm conglomerate Cetera Financial Group. As part of the planned deal lenders agreed to invest $150 million in new working capital into Cetera. Also according to the plan, the company expects debt reduction and the elimination of preferred stock worth more than $500 million.

Our firm is investigating potential unsuitable recommendations in RCS preferred stock. Before recommending investments brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. With a company as troubled and opaque as RCS, investors likely relied upon the due diligence of their advisors in making investments in the company.

The issuance of large amounts of preferred stock coincided with the downfall of RCS and was an extremely risky investment. As a background chronicled by InvestmentNews, in the fall of October 2013, Nicholas Schorsch, the owner of RCS and many of its affiliates, had capped off a string of acquisitions in just two years costing $8.8 billion in total and forging a giant non-traded REIT and broker-dealer conglomerate.

The Financial Industry Regulatory Authority (FINRA) sanctioned brokerage firm Merriman Capital, Inc. (Merriman) concerning allegations that for more than three years Merriman’s written supervisory procedures were not reasonably designed to achieve compliance the FINRA rules.  FINRA alleged that Merriman’s written supervisory procedures failed to describe the specific procedures to be followed and the persons responsible for carrying them out.  In addition, according to FINRA, between May 2009, and September 2013, Merriman Capital raised more than $16 million for its parent company through several private offerings of securities even though Merriman did not have written procedures related to the sale of private placements.

Merriman has been a FINRA member since November 1986 and its business is focused on offerings of growth companies and institutional investors.  Merriman is headquartered in San Francisco, California and employs fifty-five registered persons.

FINRA alleged that Merriman Capital’s written supervisory procedures, at fifteen pages long, listed legal rules and regulations that had to be complied with but failed to describe the specific procedures to be followed by the firm or how compliance with the procedures would be documented.  Further, FINRA found that until June 2011, Merriman written supervisory procedures failed to address private placements even though the selling private placements was a substantial portion of the firm’s business.  FINRA found that Merriman failed to address private placements in the firm’s supervisory manual even though Merriman Capital raised more than $16 million for its parent company through several private offerings.

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