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February 26, 2016 at 11:36 AM
Another week. Another RCS Capital saga.
On Thursday, beleaguered RCS Capital (RCAPQ) — now in bankruptcy proceedings — and the Cetera Financial Group of independent broker-dealers (which RCAP owns) filed a lawsuit against Lightyear Capital in the U.S. Bankruptcy Court in Delaware. The suit asks for an injunction and other measures to protect RCAP and Cetera’s interests.
According to the suit, the action has been brought against Lightyear and two former Cetera executives now with the private equity group — Cynthia Hamel and Susan Theder — over allegations that the firm is enticing senior officers to leave Cetera and join it. Such poaching and other actions are threatening the restructuring deal Cetera reached recently with several creditors in order to stay in business, it says.
Lightyear, which now is in the process of buying the Advisor Group from AIG, is thus able to obtain Cetera’s “invaluable relationships with the independent financial advisors that comprise the backbone of [its] core asset, the retail business, which is the key component of [its] proposed restructuring,” according to the lawsuit.
Cetera was sold by Lightyear to RCS Capital in 2014 for over $1 billion.
Tangled Relations
Additionally, the suit claims, Lightyear and its agents “deliberately and knowingly assisted Hamel and Theder to breach their Agreements Not to Compete, and Lightyear has flouted the express prohibitions against soliciting senior company employees and officers,” such as Hamel, Theder and Ahmed Hassanein, as set forth in a September nondisclosure deal reached between Lightyear and RCS Capital.
Cetera, which includes about 9,100 affiliated advisors, is led by Larry Roth, who used to be head of the AIG Advisor Group and is a trained attorney. When he moved to RCAP in mid-2014, then-Cetera CEO Valerie Brown was pushed out.
