According to the law firm press release, the Complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business and future acquisition prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) American Realty Capital Properties, Inc.'s ("ARCP") financial statements were materially false and misleading as a result of a massive accounting scandal perpetrated and concealed by senior management; (2) RCS Capital's announced acquisition of Cole Capital from ARCP was at serious risk due to the fraud being perpetrated at ARCP; (3) RCS Capital's revenue stream from its relationship with ARCP was in jeopardy as a result of the accounting scandal at ARCP; and as a result of the foregoing, (4) RCS Capital's public statements pertaining to its financial position as well as the Cole Capital acquisition were materially false and misleading at all relevant times.
On October 29, 2014, ARCP disclosed that its Audit Committee had determined that an "error" in accounting for adjusted funds from operations ("AFFO") had previously been identified within the ARCO, but was intentionally not corrected, and other AFFO and financial statement errors were intentionally made, resulting in an overstatement of AFFO and an understatement of the company's net loss for the three and six months ended June 30, 2014. ARCP also announced that the previously issued financial statements and other financial information contained in the Company's annual report for the year ended 2013, quarterly reports for the periods ended March 31, 2014 and June 30, 2014, and the company's earnings releases and other financial communications for these periods, should no longer be relied upon. Concurrently with this disclosure, ARCP announced the resignation of its Chief Financial Officer and Chief Accounting Officer, both of whom had key roles in preparing the allegedly fraudulent financial statements.
Moreover, according to the Wall Street Journal, the Federal Bureau of Investigation has opened a criminal investigation into ARCP. The SEC also plans to open an inquiry into the company, according to a person familiar with the situation.
As a result of the accounting scandal revealed at ARCP, RCS Capital announced on November 3, 2014 that it has terminated the previously disclosed definitive agreement to acquire Cole Capital from ARCP. On this news, shares of RCS Capital fell $2.72, or more than 16%, on extremely heavy volume, to close at $13.69 on November 3, 2014.
On November 7, 2014, after the close of trading, it was reported on Thinkadvisor.com that Massachusetts regulator William Galvin commenced an investigation of RCS Capital relating to the accounting errors disclosed at ARCP. As a result of this news, shares of RCS Capital fell $0.65, or more than 5.7%, on heavy volume, to close at $10.67 on November 10, 2014.
On December 15, 2014, ARCP issued a press release announcing the resignation of Defendant as its executive chairman and director. As a result of this news, shares of RCS Capital fell $1.35, or more than 11%, on heavy volume, to close at $10.46, on December 15, 2014.
On March 31, 2015, the Court issued an Order appointing lead plaintiffs and approving lead counsel. The Lead Plaintiffs filed an amended complaint on June 30.
On June 2, 2017, the parties entered into a Stipulation of Settlement. Preliminary approval was granted on June 20. Final approval was granted on September 28.