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RCS Capital, Cetera Settle Poaching Suit With Lightyear

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RCS Capital (RCAPQ) and Cetera Financial Group have reached a settlement with Lightyear Capital over the recruiting of executives by the private-equity group.

Last week, the parties ended a legal dispute tied to allegations that Lightyear had enticed senior officers to leave Cetera and join it, which RCAP said had threatened its bankruptcy proceedings and Cetera’s restructuring plans.

Two former Cetera executives now with Lightyear and its affiliates — Cynthia Hamel and Susan Theder — have agreed not perform work or services in ways that affect the Advisor Group’s competitive position vis-à-vis RCS Capital and Cetera through at least Sept. 4 and no later than Dec. 4.

Furthermore, Lightyear and its affiliates have agreed to not hire, employ or retain senior management of RCS-related companies through Sept. 26.

Complicated Relations

Lightyear and its affiliates, which sold Cetera to RCS Capital in $2014 for more than $1 billion, are in the process of buying the Advisor Group from AIG.

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.

Brown has been tapped to lead the Lightyear-owned Advisor Group, which has about 5,200 affiliated reps, as its new executive chairwoman once Lightyear’s purchase of the group is wrapped up, most likely in the second quarter.

Lightyear was one of some 25 companies that RCS Capital met with last year when it was trying to raise capital. In fact, Lightyear was one of 10 potential investors who signed a confidentiality agreement as part of this process.

While the private equity group agreed to the nondisclosure agreement on Sept 26, 2015, and performed due diligence regarding a potential transaction, it “did not submit a bid or otherwise provide an indication of interest,” the suit brought by RCS Capital in February explains.

According to RCAP’s legal filing from last month, “Lightyear’s actions constitute breach of contract, tortious interference with contractual relationships, and breach of the implied covenant of good faith and fair dealing,” it added.

— Check out What Will Lightyear Do With AIG Advisor Group? on ThinkAdvisor.


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