RCS Capital’s plan for Chapter 11 reorganization has been approved by a U.S. bankruptcy court for the district of Delaware. The approval brings Cetera Financial, the firm’s brokerage arm, one step closer to becoming an independent entity out from under the thumb of its troubled parent, RCAP.
"We're excited by this final step towards the company’s successful exit from the Chapter 11 process and its emergence as a Cetera-only organization that is privately owned, independently managed and well positioned for long-term success in serving financial advisors and financial institutions,” said David Orlofsky, Chief Restructuring Officer of RCS Capital and Senior Managing Director of Zolfo Cooper, the restructuring’s advisory firm. “We expect formal emergence from the restructuring process to follow soon, at which time Cetera will have further public comment.”
RCAP filed for a prearranged Chapter 11 bankruptcy in late January, listing 50 creditors, liabilities of between $100 million and $500 million and assets between $1 billion and $10 billion. Then in March, the firm filed a pre-packaged Chapter 11 bankruptcy for the holding companies of its broker/dealers, a move meant to restructure the holding companies’ terms with RCAP creditors. The court approved both bankruptcy plans, according to Prime Clerk documents.
WealthManagement.com reported on Wednesday that former LPL Financial President Robert Moore would be named non-executive chairman of the board of Cetera Financial once the bankruptcy is finalized.
Last March, Moore stepped down from his role at LPL to become CEO of Legal & General Investment Management America, an asset manager; he’s expected to continue in that role while serving as Cetera’s non-executive chairman. Larry Roth will continue to serve as CEO of Cetera.
As part of the restructuring, Investors Capital Corp., one of Cetera’s b/ds, will be merged with Cetera Advisors, and VSR Financial will merge with Summit Brokerage Services.
“This shouldn’t come as a surprise, given that these firms never seemed like a very strong fit with the rest of the Cetera network,” said Jeff Nash, president of Nash Consulting Group, a practice management company that has worked with various Cetera firms over the years, in email comments. “Cetera appears to be providing impacted advisors with ample time to make decisions on where they should go next. Advisors impacted by this should approach it as a chance to calmly assess what they really want out of any future broker/dealer relationship, versus giving in to the immediate noise from the usual industry doomsayers who are the first to shout panic.”