Embattled RCS Capital (RCAP) reported its third-quarter results late Monday and also said its board elected Cetera head Larry Roth as CEO. Former CEO Michael Weil gave up the role but remains on the board of the company, which owns the Cetera Financial Group of independent broker-dealers.
RCAP’s wholesale distribution operations, which have been rocked by a number of issues over the past 12 months, raised $868 million of equity capital in the third quarter vs. $2.3 billion a year ago.
Overall, the company had sales of $589.6 million vs. $511.8 million a year ago. However, losses grew dramatically – by roughly 830% – to -$307 million, or -$3.83 a share, vs. -$37 million, or -$0.59, in Q3’14.
The adjusted profits for its continuing operations were $2.6 million, or $0.03 per share, in Q3’15 vs. $32.1 million, or $0.51, a year ago.
Revenue produced by the firm’s nearly 9,500 independent reps was $503.5 million, “essentially flat compared to the year-ago quarter (which did not include [two recently acquired broker-dealers] VSR and Girard) and down 4.8% compared to the prior quarter,” according to the company.
“We believe Cetera Financial Group remains a strong franchise, and we are confident in our core business as we continue to see opportunities to gain market share and capitalize on the growing need for independent, high-quality retail advice,” said Roth, who is also CEO of Cetera Financial Group. “We have had continued success recruiting and retaining advisors as a result of the size, scale and resources we offer through our platform, and we remain optimistic on recruiting and advisor retention for the balance of 2015 as well as the coming year.”
The firm’s 9,476 independent financial advisors have about $225 billion in assets under administration and $45 million in assets under management, up 6% and 13% respectively from last year.
In Q3, the firm recruited 254 financial advisors with about $23.6 million in trailing 12-month gross fees and commissions. The net recruited production level, which includes the fees and commissions of departing reps, was $6.7 million vs. $21.5 million in the prior quarter.
The production level of advisors recruited in the third quarter was 40% higher than that of the advisors leaving the platform, according to Cetera. Of the unit’s $500-plus million in Q3 sales, nearly 65% was recurring, while 33% was fee-based revenues vs. 63% and 31% in the prior quarter, respectively.
The future of RCS Capital’s operations remains unclear. On Thursday, Massachusetts regulators charged RCS Capital with fraudulent proxy voting and are seeking to revoke the firm’s broker-dealer registration in the state.
In addition, RCS Capital says it recently received a notice from the New York Stock Exchange for noncompliance with the $1 minimum bid price rule. (RCS Capital stock traded near $0.35 per share in midday on Tuesday.)
Massachusetts’ secretary of the commonwealth, William Galvin, says RCAP fraudulently cast shareholder proxy votes on investment programs sponsored by American Realty Capital at the June annual meeting of the Business Development Corp. of America (BDCA), an investment sponsored by American Realty Capital, and at a special September meeting of BDCA.
The September vote was required as part of a proposed deal with Apollo Global Management to buy real estate assets from Nicholas Schorsch, according to Galvin’s office; this deal has since been canceled, though a separate arrangement for Apollo to buy Realty Capital Securities is moving ahead at $6 million, “a considerably reduced asking price,” the regulators say.