424B4 1 v347038_424b4.htm 424B4

Filed Pursuant to Rule 424(b)(4)
File No. 333-186819

2,500,000 Shares

[GRAPHIC MISSING]

RCS Capital Corporation

Class A Common Stock



 

This is an initial public offering of shares of Class A common stock of RCS Capital Corporation. All the shares of Class A common stock included in this offering are being sold by RCS Capital Corporation.

Prior to this offering, there has been no public market for the Class A common stock. Our Class A common stock has been approved for trading on the New York Stock Exchange, or NYSE, under the symbol “RCAP.”

We intend to use the net proceeds from this offering to expand our lines of business by funding internal growth and by acquiring complementary businesses, as well as for general corporate purposes. Following the application of the net proceeds of this offering and after giving effect to the transactions described herein, (i) RCAP Holdings, LLC, or Parent, which is directly or indirectly controlled by Nicholas S. Schorsch, the executive chairman of our board of directors, and William M. Kahane, our chief executive officer, initially will hold 97.5% of the voting power in RCS Capital Corporation through its ownership of the shares of our Class B common stock; and (ii) investors that purchase shares of Class A common stock in this offering will hold 2.5% of the voting power in RCS Capital Corporation through their ownership of the shares of Class A common stock. Each share of the Class A common stock offered hereby entitles the holder to one vote per share. Initially, each share of the Class B common stock entitles the holder to four votes; provided, however, that our certificate of incorporation will provide that so long as any of our Class B common stock remains outstanding, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock, and thereby control the company. We will derive our income from our operating subsidiaries, which consist of Realty Capital Securities, LLC (which we sometimes refer to as “Realty Capital Securities”), RCS Advisory Services, LLC and American National Stock Transfer, LLC, each a Delaware limited liability company, and any of which we may refer to as an “operating subsidiary.” Following this offering, Parent, through its ownership of 100% of the then-outstanding Class B Units of each operating subsidiary, will have 90.6% of the economic rights in each operating subsidiary, and we, through our ownership of 100% of the then-outstanding Class A Units of each operating subsidiary, will have 9.4% of the economic rights in each operating subsidiary.

At our request, the underwriters have reserved up to 20% of the shares of the Class A common stock being offered by this prospectus for sale, at the public offering price, to our interested directors, officers, employees and other individuals associated with us and members of their families, as well as any entities controlled by them. No underwriting discounts or commissions will be payable to the underwriters in connection to such sales.

Investing in shares of the Class A common stock involves a high degree of risk. See “Risk Factors” on page 19 to read about factors you should consider before buying shares of the Class A common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

   
  Per Share   Total
Initial public offering price   $ 20.00     $ 50,000,000  
Underwriting discount(1)   $ 1.40     $ 3,379,758  
Proceeds, before expenses, to us   $ 18.60     $ 46,620,242  

(1) See “Underwriting (Conflicts of Interest).” The underwriting discount of $3,379,758 assumes that 85,887 shares are sold pursuant to the directed share program, as described under “Underwriters (Conflicts of Interest),” where no discounts and commissions are payable.

We have also granted the underwriters a 45-day option to purchase up to an additional 375,000 shares from RCS Capital Corporation to cover over-allotments, if any, at the initial public offering price less the underwriting discount.

We expect to deliver the shares of Class A common stock against payment in New York, New York on June 10, 2013.



 

Joint Book-Running Managers

 
JMP Securities   Ladenburg Thalmann & Co. Inc.

Senior Lead Manager

National Securities Corporation

Lead Managers

Aegis Capital Corp.  J.P. Turner & Company LLC  Maxim Group LLC

Newbridge Securities Corporation     Northland Capital Markets      Realty Capital Securities, LLC

Prospectus dated June 5, 2013.


 
 

TABLE OF CONTENTS

TABLE OF CONTENTS
 
PROSPECTUS

 
  Page
Prospectus Summary     1  
Risk Factors     19  
Cautionary Note Regarding Forward-Looking Statements     41  
Our Structure and Reorganization     42  
Use of Proceeds     48  
Dividend Policy and Dividends     49  
Capitalization     50  
Dilution     51  
Unaudited Pro Forma Combined Consolidated Financial Statements     53  
Selected Financial Data of the Operating Subsidiaries     60  
Management’s Discussion and Analysis of Financial Condition and Results of Operations     61  
Business     77  
Management     96  
Our Manager and American Realty Capital     106  
Relationships and Related Party Transactions     110  
Principal Stockholders     116  
Description of Capital Stock     118  
Shares Eligible for Future Sale     121  
Material U.S. Federal Tax Considerations for Non-U.S. Holders of our Class A Common Stock     123  
Underwriting (Conflicts of Interest)     126  
Validity of Class A Common Stock     130  
Experts     131  
Where You Can Find More Information     131  
Index to Financial Statements     F-1  


 

Through and including June 30, 2013 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

You should rely only on the information in this prospectus. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.



 

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Except where the context requires otherwise, in this prospectus:

“RCS Capital Corporation,” the “company,” “we,” “us” and “our” refer to RCS Capital Corporation, a Delaware corporation, and, unless the context otherwise requires, the operating subsidiaries;
“RCS Capital” refers to our investment banking and capital markets business, which is a division of our operating subsidiary, Realty Capital Securities, LLC, as well as to our transaction management business;
“Operating Subsidiaries Unit” refers to a unit consisting of one Class B Unit of each of the operating subsidiaries, collectively;
“Parent” refers to RCAP Holdings, LLC (formerly known as AR Capital, LLC and subsequently RCS Capital, LLC), a Delaware limited liability company, the parent company of our operating subsidiaries and our sole stockholder prior to the consummation of this offering, that is directly or indirectly controlled by Nicholas S. Schorsch, the executive chairman of our board of directors, and William M. Kahane, our chief executive officer and a member of our board of directors;
Our “Manager” refers to RCS Capital Management, LLC, a Delaware limited liability company that is directly or indirectly controlled by Nicholas S. Schorsch, the executive chairman of our board of directors, and William M. Kahane, our chief executive officer and a member of our board of directors, both of whom directly or indirectly control our Parent, that will provide management services to us pursuant to a Management Agreement;
“American Realty Capital” refers to the American Realty Capital group of companies, which was founded in 2007 by Nicholas S. Schorsch, the executive chairman of our board of directors, and William M. Kahane, our chief executive officer and a member of our board of directors, to provide sponsors and advisors of direct investment programs with strategic and financial advice in connection with the formation, distribution, maintenance and liquidation phases of their offerings. The term “American Realty Capital” also refers to the entity that currently exists under the name AR Capital, LLC, the American Realty Capital brand name and the direct investment programs, registered investment funds and publicly listed REITs which are sponsored directly or indirectly by the entity that currently exists under the name AR Capital, LLC;
Our “principals” refers to Nicholas S. Schorsch, the executive chairman of our board of directors, and William M. Kahane, our chief executive officer and a member of our board of directors, who directly or indirectly control Parent;
“REITs” refers to real estate investment trusts; and
“Direct investment programs” refers to investment programs which provide for flow-through tax treatment under U.S. tax law, including, but not limited to, REITs and other types of real estate programs, business development companies, equipment leasing programs and oil and gas programs. Generally, securities issued in a direct investment program are not listed on a national securities exchange.


 

After the consummation of this offering and related transactions, (i) 2,500,000 shares of our Class A common stock will be outstanding (assuming that the over-allotment option granted to the underwriters has not been exercised), (ii) 2,500,000 Class A Units of each of our operating subsidiaries will be outstanding, (iii) 24,000,000 shares of our Class B common stock will be outstanding, and (iv) 24,000,000 Class B Units of each of our operating subsidiaries will be outstanding.



 

We are a “controlled company” under the corporate governance rules for NYSE-listed companies, and our board of directors has determined not to have a majority of independent directors or an independent nominating or compensation function and to have the full board of directors be directly responsible for compensation matters and for nominating members of our Board.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before deciding to invest in our Class A common stock. You should read this entire prospectus carefully, including the “Risk Factors” section, and our historical financial statements and the notes thereto, each included elsewhere in this prospectus.

Overview

We are a holding company that was recently formed to operate and grow the following businesses: Realty Capital Securities, LLC, our wholesale broker-dealer business; RCS Capital, a division of Realty Capital Securities, LLC, our investment banking and capital markets business; RCS Advisory Services, LLC, our transaction management services business; and American National Stock Transfer, LLC, our transfer agent business. Prior to this offering, Parent operated and held a 100% interest in each of our operating subsidiaries. Parent, our Manager and American Realty Capital are directly or indirectly controlled by Nicholas S. Schorsch, the executive chairman of our board of directors, and William M. Kahane, our chief executive officer and a member of our board of directors.

Realty Capital Securities, LLC, our wholesale broker-dealer, is a leader in the direct investment program area and coordinates with financial advisors and registered representatives to sell securities. Founded in 2007, its business metrics have grown rapidly, including its revenues, profits, capital raising, distribution capability and number of employees. For 2012, it had a 27.9% market share of the real estate direct investment program industry, measured by equity capital raised. Our wholesale broker-dealer currently is the industry’s leading multiproduct distributor of direct investment programs and, in our view, our investment banking and capital markets business is the only one focused primarily on the specialized needs of these direct investment programs, especially in real estate services, serving these companies, their sponsors and stockholders. We combine our investment banking, capital markets and transaction management expertise in structuring and maintaining offerings made by these direct investment programs. Our transfer agent, a startup entity, acts as a registrar, provides record-keeping services and executes the transfer, issuance and cancellation of shares or other securities in connection with offerings made by these direct investment programs and other products.

We believe that our leading position as a wholesale broker-dealer in the direct investment program industry, as well as our potential ability to grow our revenues and earnings, is due in large part to our affiliation with American Realty Capital, the leading sponsor and investment manager of direct investment programs in the United States. American Realty Capital was founded in 2007 and is currently managed by Nicholas S. Schorsch, the executive chairman of our board of directors, and William M. Kahane, our chief executive officer and a member of our board of directors. American Realty Capital was formed to provide sponsors and advisors of direct investment programs with strategic and financial advice in connection with the formation, distribution, maintenance and value optimization phases of their offerings. Our wholesale broker-dealer, investment bank, capital markets and transaction management businesses started as components of American Realty Capital’s in-house capabilities. We are being formed in order to expand and grow these business lines. After the completion of this offering, American Realty Capital, newly separated from us, will continue to operate its other historical businesses, while maintaining a direct relationship with us through exclusive services arrangements and common ownership.

We presently are under contract to provide distribution, investment banking and capital markets, transaction management, due diligence, marketing and promotional services to 11 real estate-focused direct investment programs and a business development company sponsored by American Realty Capital, with combined equity securities under registration for sale of more than $18.0 billion, of which $4.7 billion has been sold through May 15, 2013. Additionally, we provide services to another real estate-focused direct investment program, a publicly traded REIT and, although definitive engagement documentation has not been entered into, intend to provide underwriting, transfer agency and administrative services to an open-end registered investment fund and a closed-end registered investment fund which are both currently in registration, all sponsored by American Realty Capital. At the same time, our long-term strategy includes extending our services to sponsors and participants in addition to American Realty Capital, thus obtaining a broader footprint in the investment industry as a whole.

The direct investment program industry offers investment programs which provide for flow-through tax treatment under U.S. tax law, including, but not limited to, REITs and other types of real estate programs, business development companies, equipment leasing programs and oil and gas programs. Generally, securities issued in a

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direct investment program are publicly registered but are not listed on a national securities exchange, have limited liquidity, are managed by external managers who are compensated for their services, and are subject to front-end fees. We have provided or currently are providing broker-dealer, investment banking, capital markets and transaction management services to 12 direct investment programs, including 11 non-exchange traded, or non-traded, REITs, and one business development company. Additionally, we currently provide services to a publicly listed REIT and, although definitive engagement documentation has not been entered into, intend to provide underwriting, transfer agency and administrative services to an open-end registered investment fund and a closed-end investment fund which are both currently in registration. Since our formation, our principals have invested significant financial and intellectual capital to position us for growth opportunities in the direct investment program industry, anticipating the need of investors in such programs for liquidity, thus increasing the capital flow from the direct investment space to the publicly traded markets. In our view, we are the only investment bank principally focused on the direct investment program sector which also has the ability to navigate successfully the publicly traded markets.

We focus on serving the specific investment criteria of the direct investment program industry and the individual retail investors who are the primary purchasers of these programs. In the judgment of our management, this sector has generally been underserved by other investment banks. Sponsors and stockholders of direct investment programs have special requirements, and we believe that our common ownership with American Realty Capital, the leading sponsor of direct investment real estate offerings in the United States, gives us an especially good perspective on these requirements and a special vantage point from which to address them. Even as the direct investment program industry attracts greater attention from larger investment banks, we believe our competitive advantage lies in what we characterize as our “first-hand” industry insights, our understanding of the regulatory environment and our familiarity with retail broker-dealers, their registered representatives and their clients. We believe that this knowledge of, and singular attention to, the direct investment program industry should allow us to provide greater levels of service than our competitors.

Our Principal Businesses

Four principal lines of business make up our operating platform:

Wholesale Broker-Dealer — Our wholesale broker-dealer, Realty Capital Securities, LLC, a member of the Financial Industry Regulatory Authority, Inc., or FINRA, employs 144 individuals and currently distributes direct investment programs, including nine non-traded REITs, eight of which are sponsored by American Realty Capital, and a business development company, and recently has successfully closed another two offerings of direct investment programs. Additionally, we will provide distribution services for an open-end registered investment fund and a closed-end investment fund which are both currently in registration. Our wholesale broker-dealer is a leader in the wholesale distribution of publicly registered non-traded real estate and business development company securities. Our wholesale broker-dealer had a 27.9% market share of the $10.3 billion of equity capital raised in the non-traded REIT market in 2012 and a 56.8% market share of the $5.5 billion of equity capital raised in the non-traded REIT market in the year-to-date period ended April 30, 2013. According to industry authority Robert A. Stanger & Co., Inc., or Stanger, a niche investment bank servicing the direct investment program sector, this performance reflects market share more than seven times that of the next largest real estate-focused distributor.

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Our wholesale broker-dealer was the largest wholesaler of direct investment program offerings in 2012, with equity capital raised of approximately $3 billion. The following table shows the growth of our wholesale broker-dealer since 2008:

[GRAPHIC MISSING]

(1) Equity capital raised represents the dollar volume of the aggregate gross proceeds from equity in direct investment programs sold by retail broker-dealers with whom our wholesale broker-dealer had an exclusive dealer manager relationship.

The following charts set forth our market share within the public non-traded REIT industry for the year ended December 31, 2012 and for the year-to-date period ended April 30, 2013:

[GRAPHIC MISSING]

Data derived from Robert A. Stanger & Co., Inc., The Stanger Market Pulse, December 2012 and April 2013.

Realty Capital Securities has demonstrated a history of growing its distribution business and growing its year-over-year revenues and profitability. We believe that we have built a platform that can continue to be expanded to sell a larger number of differentiated investment offerings. American Realty Capital has been able to successfully create, register, capitalize and manage a suite of direct

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investment programs, including public, non-traded REITs and a business development company, as well as a publicly listed REIT, and we intend to use the knowledge derived from our management’s experience to expand our platform into other industries, such as open-end registered investment funds and closed-end registered investment funds and other products.

In its capacity as wholesale distributor of multiple public, non-traded securities, Realty Capital Securities serves as the dealer manager for finite life SEC-registered offerings. At its inception, Realty Capital Securities was built to distribute multiple, sector-specific public non-traded products on a platform designed to provide the retail broker dealer community with a complementary set of finite life, sector-specific public, non-traded securities. Our wholesale broker-dealer has acted as the exclusive dealer manager for offerings that have undergone a thorough due diligence process and we believe that we bring to market best-in-class products that address underserved investor needs.

We believe that Realty Capital Securities has established itself as the leading distributor in the direct investment program industry. In our opinion, this has been achieved by employing a strategy focused on the quality of the sector-specific products we evaluate, based on our assessment of the market need for the products and the timing of relevant market cycles. Most of the direct investment programs that Realty Capital Securities distributes are targeted to a class of individual investor commonly known as the “mass affluent.” According to the Nielsen report “Affluence in America: A Financial View of the Mass Affluent,” there are more than 13 million U.S. households, or 11%, classified as “mass affluent,” which is defined as a household having between $250,000 and $1,000,000 in investable assets, representing total investable wealth in the U.S. of more than $7.5 trillion. According to the report, common among these households is the erosion of traditional sources of retirement income, including reduction in defined benefit pensions, declines in home values, low interest rates on corporate and government bonds and increasing stock market volatility. In addition, these households are living longer, resulting in an increased need for investments that are structured to provide preservation of principal, regular distributions of income, protection against inflation and tax deferral as provided under current law — characteristics that Realty Capital Securities calls “durable income.” The direct investment programs that Realty Capital Securities seeks to distribute generally utilize strategies that we believe will generate “durable income” and appeal to “mass affluent” investors. We believe we have shown an ability to evaluate a management team’s performance and experience in executing the particular strategy within the sector we have targeted for product distribution. Our wholesale broker-dealer has a five-year track record evidencing an ability to build the sale of its products through a broad base of financial advisors. Realty Capital Securities has a 10-person national accounts and business development team staffed with senior executives with over 150 years of collective experience in a wide range of product distribution and sales roles. These individuals, together with the Realty Capital Securities’ product diligence and executive management teams, have built a platform-wide selling group of nearly 400 brokerage firms with more than 1,300 active selling agreements supporting approximately 100,000 financial advisors that sell direct investment programs (and, in the future, expects to sell registered investment funds) to their clients, including high net worth individuals, institutional investors and retirement plans. We believe that these firms represent the majority of independent broker-dealers participating in the direct investment program industry today.

We believe that multiproduct distributors are more common in other market segments such as life insurance, annuities and mutual funds. By endeavoring to offer products from a variety of sponsors, we believe that we will be better able to deliver consistent sales across seasonal and secular cycles, because we will be less dependent on any one offering, sponsor or investment theme. In addition, we believe that we will be better able to grow our annual sales, gross profits and earnings by distributing securities offered by sponsors in addition to American Realty Capital.

In 2012, our wholesale broker-dealer generated revenues of $287.5 million on direct investment equity capital sales of approximately $3 billion, resulting in net income of $7.4 million. Revenues from our wholesale broker-dealer may vary with changes in annual gross sales of direct investment

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programs. Our market share of sales of direct investment programs since 2008, as noted above, has increased significantly. See “Business — Our Wholesale Broker-Dealer” in this prospectus for more details.

Investment Banking and Capital Markets — Operating under the name RCS Capital, our investment banking and capital markets business employs seven professionals and provides strategic advisory and capital markets services with a focus on the direct investment program industry, including sourcing, structuring and maintaining a variety of debt finance and derivative arrangements on behalf of our clients. Due to the specialized nature of the direct investment program industry, we believe we are particularly well suited to advise funds that are distributed by our wholesale broker-dealer. In 2012, our investment banking and capital markets business was the second largest advisor to real estate mergers and acquisitions in the United States, advising on $5.5 billion in value of such mergers and acquisitions. In 2012, our investment banking and capital markets business advised on $5.8 billion in purchase price of such equity capital markets transactions and $1.8 billion of debt capital markets transactions. In 2012, American Realty Capital and Realty Capital Securities were engaged to provide services related to liquidity events, follow-on public offerings and other transactions for $7.1 million in fees, only $0.9 million of which is included in the revenues of our wholesale broker-dealer set forth in the preceding paragraph.

Due to the transactional nature of our investment banking and capital markets revenues, investment banking profits may change from period to period based on the volume and nature of transactional activity. However, we generally expect strategic value optimization transactions to be consummated in connection with direct investment programs, from which we expect to derive a substantial portion of our revenues, including sales, mergers, national securities exchange listings and initial public offerings, relating to our investment banking and capital markets business, as well as capital markets activities generally, to increase in frequency over the next three to five years. See “Business — Our Investment Bank” in this prospectus for more details.

Transaction Management Services — Operating under the name RCS Capital, our transaction management services team is comprised of 32 professionals who provide a range of services to direct investment programs, publicly traded REITs and their sponsors, including: offering registration and blue sky filings, regulatory advice with respect to the Securities and Exchange Commission, or the SEC, and FINRA registration maintenance, transaction management, marketing support, due diligence advice and related meetings, events, training and education, conference management and strategic advice in connection with liquidity events and other strategic transactions. We believe that the services offered complement the service offerings of our other lines of business.

We believe that the registration of direct investment products is unique and requires specialized expertise. Along with federal securities laws and rules imposed by the SEC and FINRA in connection with the sale of direct investment products, a third set of requirements is imposed on these products by state securities regulators. We believe our team of transaction management professionals is well suited to help structure offerings consistent with all three legal and regulatory frameworks. We view that same team as integral in assisting issuers of direct investment products in maintaining compliance with federal and state level regulations during the course of an offering, as well as in meeting both the financial reporting and ongoing disclosure changes that are unique to a continuous offering.

Additionally, in light of our transaction management services team’s experience in providing strategic advice with respect to liquidity events and other strategic transactions for direct investment programs, we believe that our team is equipped to advise issuers of other financial products as well. We intend to continue to expand the breadth of our transaction management services team in order to provide services for various investment products. For a more comprehensive discussion of the registration process for direct investment products and how our team will facilitate the structuring of these products, please see “Business — Transaction Management Services — Registration and Continuous Offering Management” in this prospectus.

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Transfer Agency — American National Stock Transfer, LLC is registered as a transfer agent with the SEC and will act as a registrar, provide record-keeping services and execute the transfer, issuance and cancellation of shares or other securities in connection with offerings conducted by issuers sponsored directly or indirectly by American Realty Capital. Our transfer agent employs 15 professionals. In addition, our transfer agent may act on behalf of other issuers of direct investment products and other securities, including securities issued by registered investment companies and publicly traded REITs. We expect that our transfer agent will also be responsible for coordinating tax reporting efforts and the payment of distributions and redemptions, among other services. We believe our transfer agent is well suited to conduct distribution reinvestment plans, or DRIPs, and share repurchase programs, which are common features of direct investment products, because of its personnel’s knowledge of, and experience with, these features of direct investment products and the experience of employees of the operating subsidiaries in executing transactions under DRIPS and share repurchase programs while employed by American Realty Capital, our dealer manager and other entities involved in the transfer agency business. Certain employees of our transfer agent have extensive experience in supervising third-party transfer agency service providers and we believe our transfer agent can use this experience to successfully grow its business. We expect that our transfer agent will generate fees from a variety of services performed for issuers of direct investment products and registered investment companies. We anticipate that those fees will be in the form of flat or account-based fees for services and per transaction fees. In 2012, American Realty Capital spent $4.9 million on transfer agency services. In light of that potential revenue, we have decided to start our transfer agency business in order to attempt to capture market share in an industry that we expect will grow. There can be no assurance that we will successfully serve as transfer agent to American Realty Capital or to any other direct investment program industry participant or that the transfer agency market will grow. See “Business — Our Transfer Agent” in this prospectus for more details relating to our transfer agent.

We believe that our lines of business exhibit considerable synergies, allowing us to offer direct investment programs and their sponsors an integrated solution for each stage of a program’s life cycle. Our transaction management team provides services related to the organization, formation and registration of these programs at their inception. Our wholesale broker-dealer provides distribution capabilities during the offering stage, while our transaction management services and transfer agent provide registration maintenance, due diligence, education and training and share transfer agency services during the offering and operating phases. Finally, our investment banking business provides strategic advisory services in the formation and structuring phase of a direct investment program and in anticipation of and during the value optimization phase. We believe these same services also are useful to registered investment funds, and other public offerings, which have less complicated life cycles but which nonetheless may require many, if not all, the same services over time.

Market Opportunity

We believe the market opportunity for the services we provide is large and growing rapidly. Since 2000, the popularity of direct investment programs of all types has expanded significantly. In 2012, according to Stanger, the direct investment program industry raised approximately $13.3 billion, consisting of non-traded REITs, business development companies and direct investment programs. As of December 31, 2012, the total equity capitalization of real estate direct investment programs tracked by Stanger was approximately $60.0 billion, and the total equity capitalization of all direct investment programs tracked by Stanger totaled $71.8 billion.

Competitive Advantages

We believe the following factors, among others, define our business model, establish our competitive position and distinguish us from other companies that participate in our business and markets:

Experienced Management:  Our lines of business are led by what we believe is a highly experienced executive management team assisted by a skilled group of professionals. Before founding or joining our company, many of our senior professionals held positions at leading investment banks, broker-dealers, insurance companies, law firms, investment management firms and mutual fund companies. Additionally, our

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executive officers average more than 20 years of experience. Following this offering, our executive management team, through its control of Parent, will own an indirect 100% interest in our Class B common stock. Our Manager provides executive management services to us under the terms of the management agreement. We do not directly employ our executive officers.

Best Practices:  We were founded with the purpose of making the direct investment program sector more transparent, more responsive and more accountable to investors by establishing what in our view is a core set of industry best practices. Our wholesale broker-dealer has adopted an affiliated transactions best practices policy, or the Policy, with respect to affiliated transactions which has been adopted by all programs distributed by our broker-dealer. The Policy generally prohibits a direct investment program from entering into any co-investments or any other business transactions with, or providing funding or making loans to, directly or indirectly, any other American Realty Capital-sponsored or other affiliates program. The Policy was adopted to assist each direct investment program distributed by our wholesale broker-dealer in executing its strategy independently and on terms that are commercially reasonable and in the best interests of all parties to a transaction. We require products distributed by our wholesale broker-dealer to have lower fees, in our judgment, than the industry norm. All direct investment programs that are distributed by our wholesale broker-dealer must adhere to these best practices. We believe our best practices and ability to provide high quality services to direct investment programs at lower cost can potentially result in superior investment returns to investors in the programs.

Direct Investment Program Specialization:  Our management currently is focused on direct investment programs and their sponsors, registered investment advisors and stockholders. We believe we are a leading investment bank that principally serves this large and growing sector. Moreover, we believe we are the only wholesale broker-dealer formed with the specific objective of supporting the distribution of direct investment programs sponsored by others. In our view, our focus on direct investment programs gives us a competitive advantage over traditional investments banks that may not understand as well as we do the specialized needs and regulatory context of these programs, their sponsors, representatives and investors.

Comprehensive Services:  Our business model serves direct investment programs, their sponsors and investors throughout the life cycle of these programs. We believe we are the only firm with the combination of resources to be positioned to do so. At the inception of a direct investment program, our transaction management services provider assists sponsors in the formation and registration of the program. Throughout the direct investment program offering period, our wholesale broker-dealer provides distribution services and our transaction management services provider provides ongoing registration, due diligence and marketing support services. At the value optimization phase of the direct investment program, our investment bank provides advisory services to maximize investor value and our transaction management services provider provides transaction support. While their life cycle is not as regular or predictable, registered investment companies continue to control a substantial amount of investment assets and, if our belief is correct, will continue to need experience-driven, high-quality fund administration, distribution, advisory and transfer agency services.

Operating Efficiencies Offered:  We believe that due to the specialized knowledge and scale of our operations, our wholesale broker-dealer and our transaction management services provider are able to offer direct investment programs and their sponsors a higher, better informed level of service at a lower cost than the sponsor otherwise could obtain. We believe that our highly experienced and focused team allows sponsors of and investors in direct investment programs to benefit from superior service at a reduced cost. We also believe that our newly formed transfer agent will be able to offer a higher level of service at a lower cost than a direct investment program or its sponsor otherwise could obtain, although there can be no assurance that our transfer agent will be able to accomplish this objective.

Common Ownership with American Realty Capital:  We believe that Parent’s and our Manager’s common ownership with American Realty Capital, a leading sponsor of direct investment programs, provides us with a unique perspective on the specialized needs of direct investment programs, their sponsors and stockholders. American Realty Capital has been a leader in innovation and in what it defines as industry best practices in direct investment programs since its formation in 2007 and has developed several direct investment programs and, more recently, a registered investment company product that currently is in

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registration. See “Business — American Realty Capital-Sponsored Public Direct Investment Programs and Publicly Traded REITs For Which our Wholesale Broker-Dealer Provided Exclusive Dealer Manager Services” for a list of American Realty Capital-sponsored offerings. We believe that our business relationship and common ownership with American Realty Capital gives us an advantage over other service providers and strategic advisors in delivering services to direct investment programs and mutual funds whether sponsored by American Realty Capital or third parties. We currently have agreements to provide distribution for an additional direct investment program, and transaction management services to 11 direct investment programs sponsored by American Realty Capital, a publicly traded REIT, and are named as the principal underwriter for two new registered investment funds that are currently in registration.

Barriers to Entry:  We believe there are significant barriers to entry into the wholesale broker-dealer business for the direct investment program industry. First, in our experience, no wholesale broker-dealer can succeed unless it is adequately capitalized. In order to fully fund an operating strategy, the business needs to create an effective bridge between the investor and the investment program. We believe our wholesale broker-dealer has demonstrated an ability to raise substantial amounts of equity capital consistently over time. In 2012, our broker-dealer raised approximately $3.0 billion of equity capital.

Because most of the equity capital raised by direct investment programs is from retail investors through registered representatives and financial advisors at retail broker-dealers and registered investment advisors, and average subscription amounts are approximately $30,000, it takes considerable effort to cultivate relationships with such registered representatives and financial advisors in order to expand our wholesale broker-dealer’s platform and footprint in the broker-dealer industry. Realty Capital Securities’ selling group is diverse, comprised of nearly 400 brokerage firms, with no more than 6% of any product’s sales being made by one firm. Realty Capital Securities employs 56 internal and 62 external wholesalers managed by a strong executive team and complemented by compliance, operations and other personnel to sell and process capital flows. In 2012, Realty Capital Securities conducted nearly 56,000 individual meetings, mailed out nearly 300,000 investment kits, processed 85,000 subscriptions and conducted an extensive series of training and educating programs. However, we believe it is not just this data that reflects what is required to raise capital on behalf of sponsors of direct investment programs; it is the ability to succeed in obtaining selling agreements with individual members of the independent broker-dealer channel for each specific investment program that provides the foundation on which Realty Capital Securities raises funds on behalf of sponsors of direct investment programs. In our view, without a clear and comprehensive understanding of the distribution channel, sufficient staffing to address the myriad issues surrounding the sale of each of these investment programs, ongoing training and education, due diligence, compliance and conference sponsorship, our wholesale broker-dealer platform would not have experienced the level of success it has achieved. In our experience, the wholesale broker-dealer business requires both capital and hard work, and American Realty Capital and Parent have invested significant resources in building this business. As a result, we believe the barriers to entry in terms of both financial and intellectual capital are considerable.

Growth Strategy

We intend to grow our business substantially by focusing on augmenting the core competencies of our wholesale broker-dealer, investment banking and capital markets business, transaction management services provider and transfer agent. At the same time, we intend to leverage our competitive advantages to maintain and build on our commitment to our current direct investment program clients and potential investment company clients and investors. We will also seek to expand our client base to include unrelated, third-party sponsors and direct investment programs. We may also make investments in businesses or infrastructure complementary to our core businesses, including, potentially, registered investment advisor operations, one or more FINRA-member entities or other businesses that we consider synergistic to our overall strategy, and may selectively pursue strategic acquisitions. We believe that our plans for growth will allow us to increase our revenues and to expand our role with clients as a valued advisor. We intend to continue to grow by:

maintaining our relationship with American Realty Capital and increasing revenues by both providing services to new direct investment programs and investment companies they sponsor as well as adding to the range of services that we provide;

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expanding our relationship with other sponsors and increasing revenue by both providing services to new direct investment programs and investment companies they sponsor as well as by adding to the range of services that we provide;
increasing the frequency and extent of our participation in all phases of the life cycle of direct investment programs and investment companies;
initiating a marketing program to explain the benefits and cost savings potential of our suite of services to sponsors, registered representatives and stockholders of direct investment programs;
increasing our participation as financial advisor to direct investment programs that are evaluating liquidity alternatives, including positioning our services as complementary to those provided by larger investment banks in order to participate as a co-advisor;
acquiring or developing businesses that complement our current principal businesses, including, potentially, registered investment advisor operations, one or more FINRA-member entities or other businesses that we consider synergistic to our overall strategy;
increasing the service offerings of our transfer agent to provide value-added ancillary services to our transfer agent clients; and
increasing our participation as financial advisor and transaction management services provider to investment funds outside the real estate and direct investment arena, including registered investment companies.

While we believe that we enjoy a number of competitive advantages which should allow us to successfully execute our aggressive growth strategy, we face a number of risks. We are newly organized as a standalone holding company and may not be able to execute our business plan as a public company. We focus our resources on an industry that currently has a limited number of participants and depend on them, including American Realty Capital, to generate a significant portion of our revenues. If we are unable to originate or execute a sufficient number of transactions with these key participants, including American Realty Capital, our revenues and net income will suffer. If we are unable to gain wider market acceptance and expand our service offerings to other clients, our business is likely to suffer. In addition, the timing of our investment banking transactions can be unpredictable, as are the related revenues. Consequently, our financial results may fluctuate substantially from quarter to quarter. With regard to our wholesale broker-dealer business, we depend upon relationships with, and the success of, retail broker-dealers, including many regional firms, to distribute direct investment products to their customers. Any decline in the appeal of these direct investment products will result in a decline in our wholesale broker-dealer revenues. In addition, the poor performance of any of the direct investment products offered by our wholesale broker-dealer could result in a decline in sales of other programs. Any principal investments or acquisitions we pursue may result in additional risks and uncertainties in our business, including the risk of capital loss. We face strong competition from larger firms, some of which have greater resources and broader name recognition and which offer a wider range of products and services. Additionally, we compete to attract qualified professionals with numerous firms in our businesses and other related businesses, such as direct investment distribution and management, hedge fund management, venture capital and private equity. A failure to hire highly skilled employees and to retain our existing employees could materially impede our growth and success.

Why We Are Going Public

We are taking the company public primarily in order to raise capital to expand our lines of business by funding internal growth and by acquiring businesses complementary to our four lines of business or for general corporate purposes. We believe that this offering will allow us to execute our growth strategy more quickly and more effectively. We believe that, as a public company, we will have greater visibility with prospective clients and industry peers, increased access to capital and additional currency with which to effect strategic combinations and opportunities as they arise. Finally, we expect that operating as a public company will provide us with increased brand recognition and will enhance our ability to attract and retain top professionals by enabling us to offer equity-based incentives linked directly to the long-term success of our business. However, fulfilling our public company financial reporting and other regulatory obligations will be expensive and time-consuming and may strain our resources. RCS Capital Corporation will receive 100% of

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the net proceeds from this offering, all or substantially all of which will be contributed as part of our reorganization to our operating subsidiaries in exchange for Class A Units of the operating subsidiaries.

Our Manager

We will be externally managed and advised by RCS Capital Management, LLC, our Manager, which will provide us with executive and management services pursuant to the terms of a management agreement. We expect to benefit from the relationships and experience of our Manager’s management team. We have structured our arrangements with our Manager in a manner that we believe provides significant benefits to our stockholders. By not employing any salaried executives, we will not be burdened by the high administrative expenses associated with employing our own management team and, instead, will rely on our Manager to provide these services in exchange for a management fee, an incentive fee and performance-based awards. In addition, these arrangements provide us access to a team of management personnel that, because we are newly formed, hold limited assets and have only a limited ability to pay substantial salaries and benefits, we believe is likely to be more capable and diverse than we would otherwise be able to attract. Our Manager will at all times be subject to the supervision and oversight of our board of directors.

The management agreement may be amended or modified by agreement in writing between us, our operating subsidiaries and our Manager. The initial term of the management agreement will end ten years after the closing of this offering, with automatic five-year renewal terms. During the initial term, we, together with our operating subsidiaries, may terminate the management agreement only for cause. Cause is defined in the management agreement as:

our Manager’s continued breach of any material provision of the management agreement following a period of 30 days after written notice thereof (or 45 days after written notice of such breach if our Manager has taken steps to cure such breach within 30 days of the written notice);
the occurrence of certain events with respect to the bankruptcy or insolvency of our Manager, including an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition;
any change of control of our Manager which a majority of our independent directors determines is materially detrimental to us;
our Manager’s bad faith, willful misconduct or gross negligence; provided, however, that if such bad faith, willful misconduct or gross negligence is caused by an employee of our Manager or one of its affiliates and the Manager takes all necessary and appropriate action against such person and cures the damage caused by such actions within 30 days of the Manager’s knowledge of its commission, the management agreement shall not be terminable; and
the dissolution of our Manager.

Effective at the expiry of the initial ten-year term or any subsequent five-year renewal term, we, together with our operating subsidiaries, may terminate the management agreement “without cause” upon the affirmative vote of at least two-thirds of our independent directors based upon: (1) our Manager’s unsatisfactory performance that is materially detrimental to us, or (2) our determination that the management fees, incentive fees or performance-based awards payable to our Manager are not fair, subject to our Manager’s right to prevent termination based on unfair fees or awards by accepting a reduction of management fees, incentive fees or awards agreed to by at least two-thirds of our independent directors. We will provide our Manager with 180 days’ prior notice of such a termination. Our Manager may also decline to renew the management agreement at will by providing us with 180 days’ written notice.

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The following table summarizes the fees we will pay to our Manager pursuant to the management agreement:

 
Type   Description
Management Fee   Our operating subsidiaries will pay our Manager a management fee in an amount equal to 10% of the aggregate net income determined in conformity with accounting principles generally accepted in the United States of America, or GAAP (if such amount is a positive number) of our three operating subsidiaries (and of any additional subsidiaries that we may form or potentially acquire after the date of this offering from time to time, as we anticipate will be provided in an amendment to the management agreement at any such time) calculated and payable quarterly in arrears, subject to the aggregate GAAP net income of our three operating subsidiaries being positive for the current and three preceding calendar quarters.
Incentive Fee   In addition, the operating subsidiaries will pay our Manager an incentive fee, calculated and payable quarterly in arrears, that is based on our earnings and stock price. The incentive fee will be an amount (if such amount is a positive number) equal to the difference between: (1) the product of (x) 20% and (y) the difference between (i) our Core Earnings, as defined below, for the previous 12-month period, and (ii) the product of (A) the weighted average of the issue price per share of our common stock of all of our public offerings multiplied by the weighted average number of all shares of common stock outstanding (including any restricted shares of Class A common stock and any other shares of Class A common stock underlying awards granted under our equity plan) in the previous 12-month period, and (B) 8.0%; and (2) the sum of any incentive fee paid to our Manager with respect to the first three calendar quarters of such previous 12-month period; provided, however, that no incentive fee is payable with respect to any calendar quarter unless our cash flows for the 12 most recently completed calendar quarters is greater than zero. Core Earnings is a non-GAAP measure and is defined as the after-tax GAAP net income (loss) of RCS Capital Corporation, after the management fee and excluding non-cash equity compensation expense, incentive fees, acquisition fees, depreciation and amortization, any unrealized gains, losses or other non-cash items recorded in net income for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income. The amount will be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussions between our Manager and our independent directors and after approval by a majority of our independent directors.
     Such management and incentive fee calculations shall commence with the quarter in which this offering is completed. For periods less than four quarters or 12 months, the calculations will be based on a pro rata concept starting with the quarter in which this offering is completed.

Our Structure and Reorganization

The diagram below depicts our organizational structure immediately after the consummation of this offering and related transactions. After the consummation of this offering and related transactions, (i)

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2,500,000 shares of our Class A common stock will be outstanding (assuming that the over-allotment option granted to the underwriters has not been exercised), (ii) 2,500,000 Class A Units of each of our operating subsidiaries will be outstanding, (iii) 24,000,000 shares of our Class B common stock will be outstanding, and (iv) 24,000,000 Class B Units of each of our operating subsidiaries will be outstanding.

[GRAPHIC MISSING]

(1) Under our directed share program, at our request, the underwriters have reserved up to 20% of the shares of Class A common stock being offered in this offering for sale to our interested directors, officers, employees and other individuals associated with us and members of their families, as well as any entities controlled by them, at the initial public offering price set forth on the cover of this prospectus. No underwriting discounts or commissions will be payable to the underwriters in connection with such sales. To the extent our interested directors, officers, employees and other individuals associated with us and members of their families, as well as any entities controlled by them, decide to buy any shares of our Class A common stock in this offering, the percentage of shares of our Class A common stock held by the public stockholders will be reduced. See “Underwriting (Conflicts of Interest) — Directed Share Program.”
(2) RCS Capital Corporation, RCAP Holdings, LLC (formerly known as AR Capital, LLC and subsequently RCS Capital, LLC) and RCS Capital Management, LLC are directly or indirectly controlled by Messrs. Schorsch and Kahane, and will continue to be following this offering and after giving effect to the reorganization transactions.
(3) As a result of its ownership of the shares of our Class B common stock, Parent will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors, for the foreseeable future.
(4) 100% Class B Units. Class B Units have no voting rights and 90.6% economic rights.
(5) 100% Class A Units. Class A Units have 100% voting rights and 9.4% economic rights.

As a holding company, we conduct all our business activities through our operating subsidiaries. Net profits and net losses of our operating subsidiaries will be allocated, and distributions will be made, 9.4% to us and 90.6% to Parent, after giving effect to the transactions described herein.

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In the future, we may engage in additional corporate reorganization transactions, including interposing an intermediate holding company as the direct owner of the operating subsidiaries, for corporate and tax efficiencies.

Reorganization Transactions

In connection with this offering, we will enter into a series of transactions, which we refer to as the “reorganization” or the “reorganization transactions,” to reorganize our capital structure. As part of the reorganization, we will amend and restate our operating subsidiaries’ operating agreements and our certificate of incorporation.

As part of the reorganization, 100% of a new class of units of the operating subsidiaries called “Class A Units,” which will entitle the holders thereof to voting and economic rights, will be issued to us, and 100% of a new class of units of the operating subsidiaries called “Class B Units,” which will entitle the holder thereof to economic rights but not voting rights, will be issued to Parent.

Shares of our Class A common stock will be issued to the public in this offering. Class A common stock will entitle holders to one vote per share and full economic rights. Immediately following this offering, holders of our Class A common stock will hold 100% of the economic rights and 2.5% of the voting rights of the company. Immediately prior to this offering, all our authorized shares of Class B common stock will be issued to Parent. Initially, each share of Class B common stock will entitle holders to four votes; provided, however, that our certificate of incorporation will provide that so long as any of our Class B common stock remains outstanding, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock, and thereby control the company. Class B common stock will have no economic rights. Immediately following this offering, Parent, as holder of our Class B common stock, will hold 0% of the economic rights and 97.5% of the voting rights of the company.

In connection with the closing of this offering, we also will enter into certain agreements with affiliated parties, as described elsewhere in this prospectus.

Parent’s Voting Rights and Our Status as a Controlled Company

After our initial public offering, Parent will control 97.5% of the voting power of our outstanding capital stock. As a result of its ownership of the shares of our Class B common stock, Parent will have the ability to control the outcome of matters submitted to our stockholders for approval for the foreseeable future, including the election of our directors, as well as the overall management and direction of our company.

Because Parent controls a majority of our outstanding voting power, we are a “controlled company” under the corporate governance rules for NYSE-listed companies. Therefore, we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or an independent nominating function. In light of our status as a controlled company, our board of directors has determined not to have an independent nominating function and to have the full board of directors be directly responsible for compensation matters and for nominating members of our board.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we are eligible to take advantage of certain exemptions from, or reduced obligations relating to, various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Other than as set forth in the following paragraph, we have not made a decision whether to take advantage of any or all these exemptions. If we do take advantage of any of the remaining exemptions, we do not know if some investors will find shares of our Class A common stock less attractive as a result. The result may be a less active trading market for shares of our Class A common stock and our stock price may be more volatile.

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In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Our Corporate Information

As of March 31, 2013, our operating subsidiaries had 198 full-time employees, all of whom are compensated by the respective operating subsidiary that employs them.

Our headquarters is located at 405 Park Avenue, New York, New York 10022. Our main office telephone number is (866) 904-2988. We maintain an Internet website at www.rcscapital.com. The information on our website is not part of this prospectus. We were incorporated on December 27, 2012 in Delaware as 405 Holding Corporation, and our name changed to RCS Capital Corporation on February 19, 2013.

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The Offering

Class A common stock we are offering    
    2,500,000 shares of Class A common stock, up to 20% of which have been reserved by the underwriters at our request for sale to our interested directors, officers, employees and other individuals associated with us and members of their families, as well as any entities controlled by them.
Class A common stock to be outstanding immediately after this offering    
    2,500,000 shares of Class A common stock. If Parent elected to exchange all its Operating Subsidiaries Units for shares of our Class A common stock (with a cancellation of its corresponding shares of our Class B common stock), 26,500,000 shares of Class A common stock would be outstanding immediately after this offering. Parent does not intend to exchange any of its Operating Subsidiaries Units for shares of our Class A common stock during the 180 days following the date of this prospectus. Any such exchange by Parent will result in dilution of the economic interests of our public stockholders.
Class B common stock to be outstanding immediately after this offering    
    24,000,000 shares of Class B common stock. Shares of our Class B common stock have voting but no economic rights (including no rights to dividends and distributions upon liquidation) and will be issued in an amount equal to the number of Class B Units of each operating subsidiary issued in the reorganization to Parent. When an Operating Subsidiaries Unit is exchanged by Parent for a share of Class A common stock, the corresponding share of Class B common stock will be cancelled. See “Relationships and Related Party Transactions — Exchange Agreement.”
Economic interests    
    Following this offering, Parent, through its ownership of 100% of the then-outstanding Class B Units of each operating subsidiary, will have 90.6% of the economic rights in each operating subsidiary, and we, through our ownership of 100% of the then-outstanding Class A Units of each operating subsidiary, will have 9.4% of the economic rights in each operating subsidiary.
Voting rights    
    One vote per share of Class A common stock. Initially, four votes per share of Class B common stock; provided, however, that our certificate of incorporation will provide that so long as any of our Class B common stock remains outstanding, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock, and thereby control us. Holders of our Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law. After our initial public offering, Parent, which is controlled directly or indirectly by our principals, initially will control 97.5% of the voting power of our outstanding capital stock. As a result of its ownership of the shares of our Class B common stock, Parent will have the ability to control the outcome of matters submitted to our stockholders for approval, including the

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    election of our directors, for the foreseeable future. See “Description of Capital Stock.”
Over-allotment option    
    We have granted to the underwriters an option to purchase up to 375,000 additional shares of Class A common stock from us at the initial public offering price (less underwriting discounts and commissions) to cover over-allotments, if any, for a period of 45 days from the date of this prospectus.
Use of proceeds    
    We estimate that the net proceeds from the sale of shares of our Class A common stock by us in this offering will be approximately $44.6 million, or approximately $51.6 million if the underwriters exercise their option to purchase additional shares of Class A common stock in full, based on the initial public offering price of $20.00 per share, in each case after deducting the underwriting discounts and estimated expenses payable by us.
    We intend to use the net proceeds from this offering to expand our lines of business by funding internal growth and by acquiring complementary businesses, as well as for general corporate purposes. Although we explore possibilities for potential acquisition candidates from time to time, currently we do not have any plans to acquire any company or business.
Dividend policy    
    Following this offering, we intend to pay quarterly cash dividends, subject to limitations imposed by Delaware law and in the sole discretion of our board of directors. We expect that our first dividend will be paid in the third quarter of 2013 (in respect of the second quarter of 2013) and will be $0.18 per share of our Class A common stock.
    The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors and may be discontinued at any time. In determining the amount of any future dividends, our board of directors will take into account any legal or contractual limitations, our actual and anticipated future earnings, cash flow, debt service and capital requirements and the amount of distributions to us from our operating subsidiaries. We intend to pay dividends out of a portion of our current earnings for each quarter and do not intend to borrow funds in order to pay dividends. We do not intend to pay out all excess cash. No assurance can be given that any dividends, whether quarterly or otherwise, will or can be paid or will be paid in any approximate amount. See “Dividend Policy and Dividends.”
    As a holding company, we will have no material assets other than our 9.4% economic and 100.0% voting ownership of the operating subsidiaries and, accordingly, we will depend on distributions from the operating subsidiaries to fund any dividends we may pay. At such time, if any, as our board of directors determines to pay dividends, we intend to cause them to make distributions to us with available cash generated from their operations in an amount sufficient to cover dividends, if any, declared by us. If the operating subsidiaries make any such distributions, then Parent will also be entitled to receive distributions on a pro rata basis, based on Parent’s economic

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    ownership of the operating subsidiaries. Parent will not be entitled to any dividends or distributions unless proportionate dividends or distributions are also paid to the holders of Class A Common Stock.
Conflicts of Interest    
    Realty Capital Securities, LLC, an underwriter in this offering, is our subsidiary. As a result, a “conflict of interest” is deemed to exist under Rule 5121 of the rules of FINRA. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. JMP Securities LLC and Ladenburg Thalmann & Co. Inc. are primarily responsible for managing this offering, and meet the requirements of Rule 5121(a)(1)(A). Accordingly, the appointment of a “qualified independent underwriter” is not required pursuant to Rule 5121(a)(2). In addition, pursuant to Rule 5121, Realty Capital Securities, LLC will not confirm sales to accounts in which it exercises discretionary authority without the prior written consent of the customer. See “Underwriting (Conflicts of Interest).”
Risk Factors    
    The “Risk Factors” section beginning on page 19 of this prospectus contain a discussion of risks that you should carefully consider before deciding to invest in shares of our Class A common stock.
Proposed NYSE symbol    
    “RCAP”

The number of shares of Class A common stock outstanding immediately after this offering excludes (i) 24,000,000 shares of Class A common stock reserved for issuance upon the exchange of the Operating Subsidiaries Units held by Parent that will be outstanding immediately after this offering (and cancellation of the corresponding shares of our Class B common stock held by Parent), and (ii) 250,000 shares of Class A common stock that will initially be reserved for issuance under an equity plan we intend to adopt.

Presentation of Information in This Prospectus

Unless otherwise indicated in this prospectus, all information in this prospectus (other than historical financial information) assumes that 2,500,000 shares of our Class A common stock will be sold at $20.00 per share and no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

Summary Selected Historical and Pro Forma Combined Consolidated Financial Data

The following tables set forth the summary selected financial data for the operating subsidiaries as of the dates and for the periods indicated. For periods prior to and including December 31, 2012, we provide data solely for Realty Capital Securities because it was the only one of our operating subsidiaries that was in operation as of and prior to December 31, 2012. The summary unaudited combined consolidated financial data gives effect to the reorganization transactions, the issuance of Class B common stock to Parent and the sale of Class A common stock in this offering.

It is important to note that we do not, and after giving effect to this offering will not, own 100% of the membership interests in the operating subsidiaries, including Realty Capital Securities. Prior to this offering, Parent owned 100% of the membership interests in each of the operating subsidiaries. Immediately prior to the effective date of this offering, 100% of the then-outstanding Class A Units of each operating subsidiary (conferring voting and economic rights) will be issued to us and 100% of the then-outstanding Class B Units of each operating subsidiary (conferring economic, but not voting, rights) will be issued to Parent.

The summary selected historical operating data for the three months ended March 31, 2013 and 2012 and the summary selected historical balance sheet data as of March 31, 2013 have been derived from the unaudited combined financial statements of the operating subsidiaries included elsewhere in this prospectus. The summary selected historical balance sheet data as of March 31, 2012 has been derived from the unaudited financial statements of Realty Capital Securities which are not included in the prospectus. The summary

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selected historical operating data for the years ended December 31, 2012, 2011 and 2010, and the summary selected historical balance sheet data as of December 31, 2012 and 2011, have been derived from the audited financial statements of Realty Capital Securities included elsewhere in this prospectus. The summary selected historical operating data for the years ended December 31, 2009 and 2008, and the summary selected historical balance sheet data as of December 31, 2010, 2009 and 2008, have been derived from audited financial statements of Realty Capital Securities that are not included in this prospectus.

The summary selected pro forma combined consolidated operating data for the three months ended March 31, 2013 and the year ended December 31, 2012, and the summary selected combined consolidated pro forma balance sheet data as of March 31, 2013 have been derived from the unaudited combined consolidated pro forma financial statements included elsewhere in this prospectus.

You should read the summary selected financial data in conjunction with “Our Structure and Reorganization,” “Unaudited Pro Forma Combined Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes and the unaudited pro forma combined consolidated financial statements and related notes included elsewhere in this prospectus.

                 
  Historical   Pro Forma
     Three Months
Ended March 31,
  Year Ended December 31,   Three Months
Ended
March 31, 2013
  Year Ended
December 31,
2012
($ in thousands,
except share data)
  2013   2012   2012   2011   2010   2009   2008
     (unaudited)   (unaudited)                            †(unaudited)   (unaudited)
Selected Operating Data:
                                                     
Revenue   $ 218,631     $ 36,190     $ 287,497     $ 174,729     $ 114,131     $ 28,219     $ 1,420     $ 218,631     $ 287,497  
Operating expenses     191,883       38,371       280,085       170,987       116,513       32,230       4,011       194,558       280,826  
Provision for income taxes                                               908       252  
Net income (loss)   $ 26,747     $ (2,181 )    $ 7,412     $ 3,742     $ (2,382 )    $ (4,011 )    $ (2,591 )    $ 23,165     $ 6,419  
Pro Forma Allocation of Net Income
                                                                                
Net Income attributable to non-controlling interests                                             $ (21,802 )    $ (6,041 ) 
Net Income attributable to RCS Capital Corporation                                             $ 1,363     $ 378  
Pro Forma Per Share Data
                                                                                
Net Income per share attributable to RCS Capital Corporation                                                                  $ 0.55     $ 0.15  
Weighted average shares used in basic and diluted net income per share                                                                    2,500,000       2,500,000  
Balance Sheet Data:
                                                                                
Cash   $ 43,749     $ 7,342     $ 12,683     $ 3,941     $ 4,157     $ 1,730     $ 374     $ 89,271           
Total assets     61,559       10,250       16,211       5,406       7,491       5,089       794       107,064           
Total liabilities     29,736       6,240       10,485       2,538       4,324       1,763       514       53,861           
Pro forma non-controlling interest                                                                    10,125           
Total equity     31,824       4,010       5,726       2,868       3,167       3,326       280       53,740           
Other Data (unaudited):
                                                                                
Direct investment equity capital raised(1)   $ 2,230,303     $ 382,222     $ 2,952,061     $ 1,765,125     $ 1,147,912     $ 284,438     $ 23,138     $ 2,230,303     $ 2,952,061  

(1) Equity capital raised represents the dollar volume of the aggregate gross proceeds from equity in direct investment programs sold by retail broker-dealers and registered investment advisors with whom our wholesale broker-dealer had a dealer manager relationship.

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RISK FACTORS

You should carefully consider each of the risks described below, together with all the other information contained in this prospectus, before deciding to invest in shares of our Class A common stock. If any of the following risks develop into actual events, our business, financial condition or results of operations could be negatively affected, the market price of your shares could decline and you could lose all or part of your investment. You should also refer to the other information set forth in this prospectus, including “Forward-Looking Statements” and our financial statements and the related notes set forth beginning on page F-1.

Risks Related to our Business

We have a limited operating history, and the past performance of Realty Capital Securities, LLC may not be indicative of our future results.

Our investment banking and capital markets, transaction management services provider, wholesale broker-dealer and transfer agent businesses were launched in January 2013, January 2013, August 2007, and November 2012, respectively, and have limited operating histories. You should not rely on the past performance of Realty Capital Securities, LLC to predict our future results.

There is no assurance that we will be able to execute our business plan as a public company. We may not be able to operate or achieve revenue or profitability for these segments. Over the past six years, American Realty Capital has invested in the creation and development of these business segments. Going forward, we expect to expect to incur additional significant expenses as we develop our investment banking and capital markets, transaction management, wholesale broker-dealer and transfer agency businesses and pursue our business strategy.

You should consider our prospects in light of the risks, uncertainties and difficulties frequently encountered by companies that are, like us, in their early stage of development.

There can be no assurance that we will be successful in expanding our service offerings to clients other than American Realty Capital.

A key component of our long-term business strategy is to expand our wholesale broker-dealer, investment banking and capital markets, transaction management and transfer agency services to sponsors and participants in the direct investment program industry, other than American Realty Capital. Other direct investment sponsors may not want to retain us for a variety of reasons, including our common ownership with American Realty Capital. Accordingly, there can be no assurance that such strategy will be successful. If we fail to increase our share of the direct investment program industry, our results of operations may suffer, our revenue streams will fail to diversify and we will be exposed to a continued overreliance on a single client.

Substantially all our revenues are derived from one client and the termination of any one dealer manager relationship or advisory engagement could reduce our revenues and harm our operating results.

Our most significant client, the American Realty Capital family of companies, accounted for a substantial portion of our total revenues since our inception. For example, a major portion of the $5.5 billion in value of mergers and acquisitions transactions, $5.8 billion in purchase price of equity capital markets transactions and $1.8 billion of debt capital markets transactions on which our investment banking and capital markets business advised in 2012 related to transactions involving direct investment programs sponsored by American Realty Capital. Moreover, a major portion of the $287.5 million in revenues our wholesale broker-dealer generated in 2012 resulted from sales of equity capital of direct investment programs sponsored by American Realty Capital. We expect our dealer manager relationships and advisory engagements will continue to be substantially focused on American Realty Capital, and that client will account for a large percentage of our revenues in any particular year. As a result of our dependence upon American Realty Capital, the adverse impact on our results of operations of one lost mandate or the failure of one transaction or restructuring on which we are advising to be completed can be significant.

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Extensive or frequent changes in regulations could adversely affect our business.

The direct investment program industry is subject to extensive and frequently changing state, FINRA and SEC regulation. We are required to comply with or help our clients comply with, as applicable, complex laws and regulations at the federal and state levels, as well as with FINRA, relating to, among other things:

securities registration and disclosure;
the structuring of securities products;
limitations on underwriting compensation;
the determination of suitability for investors of a particular investment;
the use of sales literature for direct investment offerings; and
annual blue sky renewals.

New laws and regulations are enacted from time to time to regulate new and existing services and products in the direct investment program industry. Because many of these laws and regulations are relatively new and are complex, we do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations. Changes in the law or new interpretations of existing laws also could have an adverse effect on our methods and costs of doing business.

For example, FINRA has proposed amendments to its rule requiring a per share estimated value to be included in a non-traded REIT’s annual report. Under the proposed amendment, under certain circumstances the share value may be required to be shown as lower than the offering price. The proposed amendment could adversely impact the direct investment program industry if investors or registered representatives react negatively to the required disclosures, and such an adverse impact on the direct investment program industry may harm our results of operations.

In addition, state securities regulators require that investors in direct investment programs meet certain minimum income and/or net worth standards. These standards may vary from state to state and change frequently. Changes to suitability standards may impose additional costs on us as we spend resources familiarizing ourselves, as well as the registered representatives with whom we do business, with the new standards. If a broker-dealer does not satisfy the requirements with regards to suitability standards, it could be subject to substantial liability, including fines, penalties and possibly rescission.

Along with suitability requirements, state regulators have also imposed limitations on an investor’s exposure to direct investment programs. The breadth and scope of these limitations have varied considerably and may limit the exposure that a resident of a certain state has to a product, sponsor or direct investment programs generally. These concentration limitations have been applied with more and more frequency of late and have increasingly targeted all direct investment programs.

As of June 4, 2013, the U.S. Department of Labor, or DOL, is preparing an amendment to the definition of “fiduciary” for purposes of ERISA. The proposed rule would broaden the scope of persons who could be ERISA fiduciaries and the activities that could require fiduciary treatment. The proposed rule could have consequences on the broker-dealer industry that are difficult to predict. The uncertainty surrounding the proposed DOL rulemaking may cause broker-dealers to delay their decision to sell products that our clients are offering, which could reduce demand for our services. If we were deemed fiduciaries or if our activities were deemed to be fiduciary activities, or if the same were true for the broker-dealers with whom we do business, we and they may be subject to additional regulation and, potentially, liability, and our results of operations could suffer as a result.

Parent has control over key decision making as a result of its control of our Class B common stock, and the control by its principals of our Manager.

The holder of our Class B common stock initially will be entitled to four votes per share of Class B common stock, and the holders of our Class A common stock will be entitled to one vote per share of Class A common stock. As a result of the Class B common stock it holds, Parent initially will be able to exercise voting rights with respect to an aggregate of 24,000,000 shares of common stock, which initially are entitled

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to four votes per share and which initially will represent 97.5% of the voting power of our outstanding capital stock following our initial public offering; provided, however, that our certificate of incorporation will provide that so long as any of our Class B common stock remains outstanding, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock, and thereby control the company. Accordingly, Parent will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all our assets, for the foreseeable future. This concentrated control could delay, defer or prevent a change of control, merger, consolidation or sale of all or substantially all our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support. This concentrated control could also discourage a potential investor from acquiring our Class A common stock due to the limited voting power of such stock relative to the Class B common stock and might harm the market price of our Class A common stock. In addition, Messrs. Schorsch and Kahane have the ability to control the management and major strategic investments of our company as a result of their positions as principals and officers of our Manager, and as executive chairman of our board of directors and our chief executive officer and director, respectively, and their ability to control the election or replacement of our directors. In the future, our Manager also may be entitled to equity incentive awards under an equity plan we intend to adopt, which would further concentrate control of our company in Messrs. Schorsch and Kahane, due to their indirect ownership of our Manager. As a stockholder, even a controlling stockholder, Parent is entitled to vote its shares in its own interests, which may not always be in the interests of our stockholders generally. See “— Risks Related to our Structure” for additional risks relating to Parent’s voting control of our capital stock.

We will be dependent on our Manager and its officers, especially Messrs. Schorsch, Kahane, Budko, Block and Weil, who provide services to us through the management agreement, and we may not find a suitable replacement for our Manager if the management agreement is terminated, or for these officers if they leave American Realty Capital or otherwise become unavailable to us.

We will rely heavily on our Manager. Our Manager will have significant discretion as to the implementation of our operating policies and strategies. Accordingly, we believe that our success will depend to a significant extent upon the efforts, experience, diligence, skill and network of business contacts of the officers of our Manager. The officers of our Manager will evaluate our business strategy and determine how to allocate resources, funds and personnel to each of our business segments; therefore, our success will depend on their continued service. The departure of any of the officers of our Manager could have a material adverse effect on our performance and slow our future growth.

Our Manager will not be obligated to dedicate any of its officers exclusively to us. In addition, none of our officers or the officers of our Manager will be obligated to dedicate any specific portion of his time to our business. Each of them has significant responsibilities for other business segments currently managed by affiliates of American Realty Capital, including as a result of being part of the senior management or key personnel of other American Realty Capital entities and their advisors. For example, four of the American Realty Capital-sponsored REITs have registration statements that became effective within the last 12 months. Additionally, one American Realty Capital-sponsored program is currently in registration. As a result, such REITs will have concurrent and/or overlapping financing and operational phases as us, which may cause conflicts of interest to arise throughout the life of our company. As a result, these individuals may not always be able to devote sufficient time to the management of our business. Further, when there are turbulent conditions in the real estate markets or distress in the credit markets that affect American Realty Capital, the attention of our Manager’s principals and executive officers will also be required by the other entities and businesses managed by affiliates of American Realty Capital. In such situations, we may not receive the level of support and assistance that we might receive if we were internally managed.

In addition, we offer no assurance that our Manager will remain our manager. The initial term of our management agreement between us and Manager will extend until the tenth anniversary of the closing of this offering, with automatic five-year renewals, subject to termination by nonrenewal upon a 180-day prior written notice. If the management agreement is terminated and no suitable replacement is found to provide the services needed by us under that agreement, we may not be able to execute our business plan.

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The management agreement with our Manager was not negotiated on an arm’s-length basis and may not be as favorable to us as if the management agreement had been negotiated with an unaffiliated third party and may be costly and difficult to terminate.

Our executive officers and five of our seven directors are also principals of Parent and principals and executives of our Manager. Our management agreement with our Manager was negotiated between related parties and its terms, including amounts payable thereunder, may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

Termination of the management agreement with our Manager without cause will be difficult to effect. During the initial term, we, together with our operating subsidiaries, may terminate the management agreement only for cause. Effective at the expiry of the initial ten-year term or any subsequent five-year renewal term, we, together with our operating subsidiaries, may terminate the management agreement without cause, upon the affirmative vote of at least two-thirds of our independent directors based upon: (1) our Manager’s unsatisfactory performance that is materially detrimental to us; or (2) a determination that the management fees, incentive fees or performance-based awards payable to our Manager are not fair, subject to our Manager’s right to prevent termination based on unfair fees or awards by accepting a reduction of management fees, incentive fees or awards agreed to by at least two-thirds of our independent directors. Our Manager will be provided 180 days’ prior written notice of any such termination. These provisions may adversely affect our ability to terminate our Manager without cause.

Our Manager will be contractually committed to serve us only until the tenth anniversary of the closing of this offering. Thereafter, the management agreement will be renewable for five-year terms; provided, however, that our Manager may terminate the management agreement before the end of any five-year term at will upon 180 days’ prior written notice. If the management agreement is terminated and no suitable replacement is found to manage us, we may not be able to execute our business plan.

Pursuant to the management agreement, our Manager will not assume any responsibility other than to render the services called for thereunder and will not be responsible for any action of our board of directors in following or declining to follow its advice or recommendations. Our Manager will maintain a contractual as opposed to a fiduciary relationship with us. Under the terms of the management agreement, none of our Manager or any of its respective officers, members or personnel, any person controlling or controlled by our Manager or any person providing sub-advisory services to our Manager will be liable to us, any subsidiary of ours, our directors, our stockholders or any subsidiary’s stockholders or partners for acts or omissions performed in accordance with and pursuant to the management agreement, except because of acts constituting bad faith, willful misconduct or gross negligence. In addition, we will agree to indemnify our Manager and each of its officers, stockholders, members, managers, directors and personnel, any person controlling or controlled by our Manager and any person providing sub-advisory services to our Manager with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager not constituting bad faith, willful misconduct or gross negligence. See “Our Manager and American Realty Capital — Management Agreement.”

Payment of fees to our Manager reduces cash available for business investment and stockholder distribution.

Our Manager will perform executive and management services for us. Our Manager will be paid substantial fees for these services, which will reduce the amount of cash available for investment in our business or distribution to stockholders. Such fees will consist of (i) a management fee, (ii) an incentive fee and (iii) performance-based awards to our Manager, as further described under “Our Manager and American Realty Capital — Management Agreement — Management and Incentive Fees” and “Management — 2013 Manager Multi-Year Outperformance Agreement.” Also, in the future we may contract with Parent and/or our Manager to perform other services with respect to our business segments in respect of which we will pay additional fees, which are undetermined at this time.

In general, the operating subsidiaries will be permitted to deduct all ordinary and necessary business expenses incurred in the operation of their businesses. The management fee payable by the operating subsidiaries to our Manager, a related party, will be allocated among the operating subsidiaries based on the relative amount of time spent by our Manager providing management services to each operating subsidiary, or

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based on any other reasonable method determined by our independent directors. The Internal Revenue Service, or IRS, could challenge the allocation of the management fee amongst the operating subsidiaries or the deductibility of the management fee by one or more of the operating subsidiaries. If the deduction were successfully denied, in whole or in part, the operating subsidiaries would compute their taxable income without deducting the management fee, thereby increasing their taxable income (or reducing their losses) despite the reduction in the operating subsidiaries’ cash due to the payment of the management fee to our Manager.

There are various conflicts of interest in our relationship with Parent and our Manager, which could result in decisions that are not in the best interests of our stockholders.

We are subject to conflicts of interest arising out of our relationship with Parent and our Manager. Specifically, Mr. Schorsch, the executive chairman of our board of directors, Mr. Kahane, our chief executive officer and one of our directors, Mr. Budko, our executive vice president, chief investment officer and one of our directors, Mr. Block, our executive vice president, chief financial officer, assistant secretary and one of our directors, and Mr. Weil, our president, treasurer, secretary and one of our directors, are executives and/or members of both Parent and our Manager. These individuals have conflicts between their duties to us and their duties to, and interests in, Parent, our Manager and other affiliates of Parent and our Manager, and these conflicts may not be resolved in our favor.

Conflicts may arise with respect to the interpretation, continuation, renewal or enforcement of our agreements with our Manager, Parent and their affiliates, including the agreements described under “Relationships and Related Party Transactions.” The resolution of any such conflict in favor or Parent, our Manager or any of their affiliates may materially harm our results of operations and the value of your shares of Class A common stock.

The management fees payable to our Manager under the management agreement may cause our Manager to engage in risky behavior in order to increase its compensation.

Under the management agreement, our Manager will be entitled to receive (i) management fees based on the aggregate GAAP net income of our three operating subsidiaries and (ii) incentive fees based on our Core Earnings, as defined under “Our Manager and American Realty Capital — Management Agreement.” Our Manager also will be entitled to receive performance-based awards based on Total Return as measured against a peer group of companies, as further described under “Management — 2013 Manager Multi-Year Outperformance Agreement.” In providing services to us under the terms of the management agreement, the opportunity to earn compensation based on the aggregate GAAP net income of our three operating subsidiaries and based on our Core Earnings may lead our Manager to place undue emphasis on the maximization of the aggregate GAAP net income of our three operating subsidiaries and Core Earnings at the expense of other criteria that would be beneficial to our business, such as preservation of capital, in order to obtain more compensation. Additionally, our Manager might engage in risky or speculative behavior in order to maximize Total Return, even if such behavior might put our enterprise at risk.

Prior to November 2012, our transfer agent did not exist.

One of our operating subsidiaries, American National Stock Transfer, LLC, a transfer agent, is being launched as a new business. The business was formed on November 2, 2012 and has had limited operations to date. There is no assurance that we will be able to execute our business plan for our transfer agent operating subsidiary. We may not be able to operate or launch our transfer agent operating subsidiary successfully or achieve revenue or profitability. We expect to incur significant expenses as we develop the business and strategy of our transfer agent. If we are unable to execute its business strategy, or are unable to attract customers or capital either as a result of the risks identified herein or for any other reason, our business, results of operations, and financial condition could be materially and adversely affected and we may be forced to terminate operations related to our transfer agent, which could have a material adverse effect on our business, results of operations and financial condition.

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If we fail to manage future growth effectively, we may not be able to meet our customers’ needs or be able to meet our future reporting obligations.

We have expanded our operations since inception and anticipate that further expansion will be required. This future growth, if it occurs, will place significant demands on our management, infrastructure and other resources. To manage any future growth, we will need to:

hire, integrate and retain highly skilled and motivated employees;
continue to improve our financial and management controls, reporting and operational systems and procedures;
expand our marketing infrastructure and capabilities;
make capital expenditures on information technology, office space and tangible assets;
provide adequate training and supervision to maintain high quality standards; and
devote our management’s attention to any unforeseen issues that may arise related to our growth.

If we do not effectively manage our growth we may not be able to meet our customers’ needs, thereby adversely affecting our revenues and operations, or be able to meet our future reporting obligations.

Increases in interest rates, by potentially adversely impacting the performance of direct investment programs, including net lease programs, may exert negative pressure on our results of operations and the price of your shares of Class A common stock.

As with other yield-oriented securities, shares of direct investment programs, particularly those marketed to “mass affluent” investors, who we believe seek products with “durable income” characteristics, are impacted by their level of distributions to their stockholders. The distribution rate is often used by investors to compare and rank similar yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates, either positive or negative, may affect the level of distributions that direct investment programs may make and influence the decisions of investors who are considering investing in their common stock. A rising interest rate environment could have an adverse impact on the common stock price of direct investment programs, their ability to issue additional equity and the cost to them of any such issuance or incurrence. Because we rely on the direct investment program industry, any macroeconomic conditions affecting the industry adversely may negatively impact our results of operations and the price of your shares of Class A common stock.

In particular, rising interest rates may adversely impact direct investment programs that invest in net-leased properties because investors generally evaluate net-lease securities in conjunction with an analysis of prevailing interest rates. A changing interest rate environment may cause securities of net-lease direct investment programs to lose value, which could materially harm our operations due to the large number of net-lease programs on the American Realty Capital platform.

Our ability to attract and retain qualified professionals is critical to our success, and our failure to do so may materially impair the value of your shares of Class A common stock.

We depend on the skills and expertise of the qualified professionals who work for our operating subsidiaries and our success depends on our ability to retain existing and attract new qualified professionals. The professionals and senior marketing personnel of our operating subsidiaries have direct contact with our direct investment clients and their consultants and with key individuals within each of our other distribution sources, and the loss of these personnel could jeopardize those relationships and result in the loss of such accounts. Due to the regulated nature of some of our businesses, some of the key personnel of our operating subsidiaries could become subject to suspensions or other limitations on the scope of their services to the company from time to time. If we lose the services of any key personnel, we may not be able to manage and grow our operations effectively, enter new markets or develop new products.

We also anticipate that it will be necessary for us to hire additional professionals as we further diversify our products and strategies. Competition for employees with the necessary qualifications is intense and we may not be successful in our efforts to recruit and retain the required personnel. Our ability to retain and

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attract these personnel will depend heavily on the amount of compensation we can offer. Compensation levels in the broker-dealer industry are highly competitive and can fluctuate significantly from year to year. Consequently, our profitability could decline as we compete for personnel. An inability to recruit and retain qualified personnel could affect our ability to provide acceptable levels of service to our clients and funds and hinder our ability to attract new clients, each of which could have a material adverse effect on our business.

We may require additional financing, which may not be available on acceptable terms or at all.

In order for us to have the opportunity for future success and profitability, we periodically may need to obtain additional financing, either through borrowings, public offerings, private offerings, or some type of business combination (e.g., merger, buyout, etc.). We have actively pursued a variety of funding sources, and have consummated certain transactions in order to address our capital requirements. We may need to seek to raise additional capital through other available sources, including borrowing additional funds from third parties, and there can be no assurance that we will be successful in such pursuits. Additionally, the issuance of new securities to raise capital will cause the dilution of shares held by current stockholders. Accordingly, if we are unable to generate adequate cash from our operations, and if we are unable to find sources of funding, such an event would have an adverse impact on our liquidity and operations.

We are exposed to risks due to our investment banking activities.

Participation in an underwriting syndicate or a selling group involves both economic and regulatory risks. An underwriter may incur losses if it is unable to resell the securities it is committed to purchase, or if it is forced to liquidate its commitment at less than the purchase price. In addition, under federal securities laws, other laws and court decisions with respect to underwriters’ liabilities and limitations on the indemnification of underwriters by issuers, an underwriter is subject to substantial potential liability for misstatements or omissions of material facts in prospectuses and other communications with respect to such offerings. Acting as a managing underwriter increases these risks. Underwriting commitments constitute a charge against net capital and our ability to make underwriting commitments may be limited by the requirement that we must at all times be in compliance with the net capital rule.

Our risk management policies and procedures may leave us exposed to unidentified risks or an unanticipated level of risk.

The policies and procedures we employ to identify, monitor and manage risks may not be fully effective. Some methods of risk management are based on the use of observed historical market behavior. As a result, these methods may not accurately predict future risk exposures, which could be significantly greater than the historical measures indicate. Other risk management methods depend on evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by us. This information may not be accurate, complete, up-to-date or properly evaluated. Management of operational, legal and regulatory risks requires, among other things, policies and procedures to properly record and verify a large number of transactions and events. We cannot assure that our policies and procedures will effectively and accurately record and verify this information.

We seek to monitor and control our risk exposure through a variety of separate but complementary financial, credit, operational and legal reporting systems. We believe that we are able to evaluate and manage the market, credit and other risks to which we are exposed. Nonetheless, our ability to manage risk exposure can never be completely or accurately predicted or fully assured. For example, unexpectedly large or rapid movements or disruptions in one or more markets or other unforeseen developments could have a material adverse effect on our results of operations and financial condition. The consequences of these developments can include losses due to adverse changes in inventory values, decreases in the liquidity of trading positions, higher volatility in earnings, increases in our credit risk to customers as well as to third parties and increases in general systemic risk.

Our wholesale broker-dealer is subject to various risks associated with the securities industry, including risks particular to its function as a wholesale broker-dealer.

Our wholesale broker-dealer is subject to uncertainties that are common in the securities industry. These uncertainties include:

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the volatility of domestic and international financial, bond and stock markets;
extensive governmental regulation;
litigation;
intense competition;
substantial fluctuations in the volume and price level of securities; and
dependence on the solvency of various third parties.

As a result, revenues and earnings may vary significantly from quarter to quarter and from year to year. In periods of low volume, profitability is impaired, because certain expenses remain relatively fixed. In the event of a market downturn, our business could be adversely affected in many ways. Our revenues are likely to decline in such circumstances and, if we are unable to reduce expenses at the same pace, our profit margins would erode.

In addition, our broker-dealer is subject to risks that are particular to its function as a wholesale broker-dealer. For example, our wholesale broker-dealer provides substantial promotional support to the broker-dealers selling a particular offering, including by providing sales literature, forums, webinars, press releases and other mass forms of communication. Due to the volume of materials that our wholesale broker-dealer may provide throughout the course of an offering, much of which may be scrutinized by regulators, our wholesale broker-dealer may be exposed to significant liability under federal and state securities laws, and subject to fines and suspension from the SEC and FINRA.

Failure to comply with the net capital requirements could subject us to sanctions imposed by the SEC or FINRA.

One of our operating subsidiaries, Realty Capital Securities, LLC, a broker-dealer, is subject to the SEC’s net capital rule which requires the maintenance of certain levels of minimum net capital. Our wholesale broker-dealer is required to maintain certain levels of minimum net capital. The net capital rule is designed to measure the general financial integrity and liquidity of a broker-dealer. Compliance with the net capital rule limits those operations of broker-dealers that require the intensive use of their capital, such as underwriting commitments and principal trading activities. The rule also limits the ability of securities firms to pay dividends or make payments on certain indebtedness, such as subordinated debt, as it matures. FINRA may enter the offices of a broker-dealer at any time, without notice, and calculate the firm’s net capital. If the calculation reveals a deficiency in net capital, FINRA may immediately restrict or suspend certain or all the activities of a broker-dealer. Our wholesale broker-dealer operating subsidiary may not be able to maintain adequate net capital, or its net capital may fall below requirements established by the SEC, and subject us to disciplinary action in the form of fines, censure, suspension, expulsion or the termination of business altogether. In addition, if these net capital rules are changed or expanded, or if there is an unusually large charge against net capital, operations that require the intensive use of capital would be limited. A large operating loss or charge against net capital could adversely affect our ability to expand or even maintain our present levels of business, which could have a material adverse effect on our business. In addition, we may become subject to net capital requirements in other foreign jurisdictions in which we currently operate or which we may enter. We cannot predict our future capital needs or our ability to obtain additional financing.

Our business could be adversely affected by a downturn in the financial markets.

The business of our wholesale broker-dealer is materially affected by conditions in the financial markets and economic conditions generally, both in the United States and elsewhere around the world. Many factors or events could lead to a breakdown in the financial markets including war, terrorism, natural catastrophes and other types of disasters. These types of events could cause people to begin to lose confidence in the financial markets and their ability to function effectively. If the financial markets are unable to effectively prepare for these types of events and ease public concern over their ability to function, our revenues are likely to decline and our operations are likely to be adversely affected.

Unfavorable financial or economic conditions may reduce the number and size of the transactions in which we provide underwriting services, merger and acquisition consulting and other services. Our investment

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banking revenues, in the form of financial advisory, placement agent and underwriting fees, are directly related to the number and size of the transactions in which we participate and would therefore be adversely affected by a sustained market downturn. Additionally, a downturn in market conditions could lead to a decline in the volume of transactions that we execute for our customers and, therefore, to a decline in the revenues we receive from commissions and spreads.

Market fluctuations and volatility may reduce our revenues and profitability.

Our revenue and profitability may be adversely affected by declines in the volume of securities transactions and in market liquidity. Additionally, our profitability may be adversely affected by losses from the underwriting of securities or failure of third parties to meet commitments.

Lower securities price levels may also result in a reduced volume of transactions. During periods of declining volume and revenue, our profitability would be adversely affected. Declines in market values of common stocks and the failure of issuers and third parties to perform their obligations can result in illiquid markets.

Competition with other financial firms may have a negative effect on our business.

We compete directly with national and regional full-service broker-dealers and a broad range of other financial service firms, including banks and insurance companies. Competition has increased as smaller securities firms have either ceased doing business or have been acquired by or merged into other firms. Mergers and acquisitions have increased competition from these firms, many of which have significantly greater financial, technical, marketing and other resources than the company. Many of these firms offer their customers more products and research than currently offered by us. These competitors may be able to respond more quickly to new or changing opportunities, technologies and client requirements. These competitors may have lower costs or provide more services, and may offer their customers more favorable commissions, fees or other terms than those offered by the company. To the extent that issuers and purchasers of securities transact business without our assistance, our operating results could be adversely affected.

If we do not continue to develop and enhance our services in a timely manner, our business may be harmed.

Our future success will depend on our ability to develop and enhance our services and add new services. We operate in a very competitive industry in which the ability to develop and deliver advanced services through the Internet and other channels is a key competitive factor. There are significant risks in the development of new or enhanced services, including the risks that we will be unable to:

effectively use new technologies;
adapt our services to emerging industry or regulatory standards; or
market new or enhanced services.

If we are unable to develop and introduce new or enhanced services quickly enough to respond to market or customer requirements or to comply with emerging industry standards, or if these services do not achieve market acceptance, our business could be seriously harmed.

We are subject to extensive securities regulation and the failure to comply with these regulations could subject us to penalties or sanctions.

The securities industry and our business are subject to extensive regulation by the SEC, state securities regulators and other governmental regulatory authorities. We are also regulated by industry self-regulatory organizations, including FINRA. One of our operating subsidiaries is a broker-dealer registered with the SEC and is a member firm of FINRA. Broker-dealers are subject to regulations which cover all aspects of the securities business, including sales methods and supervision, trading practices among broker-dealers, use and safekeeping of customers’ funds and securities, capital structure of securities firms, record keeping and the conduct of directors, officers and employees. Changes in, or the addition of, laws or regulations or in governmental policies could cause us to change the way we conduct our business, which could adversely affect the company.

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Compliance with many of the regulations applicable to the company involves a number of risks, particularly in areas where applicable regulations may be subject to varying interpretation. These regulations often serve to limit our activities, including through net capital rules, customer protection and market conduct requirements. If we are found to have violated an applicable regulation, administrative or judicial proceedings may be initiated against us that may result in a censure, fine, civil penalties, issuance of cease-and-desist orders, the deregistration or suspension of our broker-dealer activities, the suspension or disqualification of our officers or employees, or other adverse consequences. The imposition of any of these or other penalties could have a material adverse effect on our operating results and financial condition.

In April 2013, Realty Capital Securities received notice and a proposed Letter of Acceptance, Waiver and Consent, or AWC, from FINRA, the self-regulatory organization that oversees broker-dealers, that certain violations of SEC and FINRA rules, including Rule 10b-9 under the Exchange Act and FINRA Rule 2010, occurred in connection with its activities as a co-dealer manager for a public offering, as further described under “Business — Legal Proceedings.” Without admitting or denying the findings, Realty Capital Securities submitted an AWC, which FINRA accepted on June 4, 2013.

Our transaction management services business involves providing services that meet the legal needs of our clients and, as a result, is subject to a variety of complex and evolving laws and regulations.

Our transaction management services business involves providing services that meet the legal needs of our clients, which may subject us to allegations of unauthorized practice of law, or UPL. UPL generally refers to an entity or person giving legal advice who is not licensed to practice law. However, laws and regulations defining UPL, and the governing bodies that enforce UPL rules, differ among the various jurisdictions in which we operate. We are unable to acquire a license to practice law in the United States, or employ licensed attorneys to provide legal advice to our customers, because we do not meet the regulatory requirement of being exclusively owned by licensed attorneys. We also may be subject to laws and regulations that govern business transactions between attorneys and non-attorneys, including those related to the ethics of attorney fee-splitting and the corporate practice of law. We may incur costs associated with responding to, defending and settling proceedings related to UPL, and the provision of our services more generally. We can give no assurance that we will prevail in such regulatory inquiries, claims, suits and prosecutions on commercially reasonable terms or at all. Responding to, defending and/or settling regulatory inquiries, claims, suits and prosecutions may be time-consuming and divert management and financial resources or have other adverse effects on our business. A negative outcome in any of these proceedings may result in changes to or discontinuance of some of our services, potential liabilities or additional costs that could have a material adverse effect on our business, results of operations, financial condition and future prospects.

We face significant competition for wholesalers.

We are dependent upon our employees who support our wholesale brokerage business. We are exposed to the risk that employees could leave the firm or decide to affiliate with another firm and that we will be unable to recruit suitable replacements. A loss of a large group of wholesalers could have a material adverse impact on our ability to generate revenue in the wholesale brokerage business.

Internet and internal computer system failures or compromises of our systems or security could damage our reputation and harm our business.

A portion of our business is conducted through the Internet. We could experience system failures and degradations in the future. We cannot assure you that we will be able to prevent an extended system failure if any of the following events occur:

human error;
subsystem, component or software failure;
a power or telecommunications failure;
an earthquake, fire, or other natural disaster or act of God;
hacker attacks or other intentional acts of vandalism; or
acts of terror or war.

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Failure to adequately protect the integrity of our computer systems and safeguard the transmission of confidential information could harm our business.

The secure transmission of confidential information over public networks is a critical element of our operations. We rely on encryption and authentication technology to provide the security and authentication necessary to effect secure transmission of confidential information over the Internet. We cannot assure you that advances in computer capabilities, new discoveries in the field of cryptography or other events or developments will not result in a compromise of the technology or other algorithms used by our vendors and us to protect client transaction and other data. Any compromise of our systems or security could harm our business.

The brands of RCS Capital Corporation and our operating subsidiaries may not achieve the broad recognition necessary to succeed.

We believe that broader recognition and positive perception of the brands of RCS Capital Corporation and our operating subsidiaries is essential to our future success. Accordingly, we intend to continue to pursue an aggressive brand enhancement strategy, which will include multimedia advertising, promotional programs and public relations activities. These initiatives will require significant expenditures. If our brand enhancement strategy is unsuccessful, these expenses may never be recovered and we may be unable to increase future revenues. Successful positioning of our brand will depend in a large part on:

the success of our advertising and promotional efforts;
an increase in the number of users and page views of our operating subsidiaries’ website; and
the ability to continue to provide a website and services useful to our clients.

Risks Related to our Industry

We rely for our revenues on the direct investment program industry, so any developments that adversely affect the direct investment program industry will adversely affect us.

Since 2008, substantially all our revenues have come from services that we have provided to the direct investment program industry, and we anticipate a significant majority of our revenues will come from the direct investment program industry in the future as well. Our exposure to the direct investment program industry leaves us vulnerable to adverse developments in that industry including, but not limited to:

a reduction in the popularity of direct investments among retail investors;
rising interest rates, which could have the effect of reducing investor demand for higher-yielding securities;
a determination by the Federal Reserve that asset bubbles in certain investment product categories may require a policy response;
continued or increasing negative publicity concerning the non-traded REIT industry;
changes in tax law;
increased, costly or burdensome regulation from the SEC, state securities regulators or FINRA; and
malfeasance by sponsors or broker-dealers in the direct investment program industry, including by our competitors and competitors of American Realty Capital, which could reflect poorly on the industry and on us.

An adverse development relating to the direct investment program industry, including but not limited to any of the foregoing, could reduce our sources of revenue and exert downward pressure on your shares of Class A common stock.

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The direct investment program industry recently has come under scrutiny from FINRA, the SEC and state securities regulators. A negative public perception of the industry may decrease demand for the products that are the source of our revenues.

In 2011, FINRA filed a complaint against a broker-dealer charging it, among other things, with soliciting investors to purchase non-traded REIT shares without fully investigating suitability, and for marketing non-traded REITs on its website with misleading returns. On October 22, 2012, the case was settled and FINRA ordered the broker-dealer to pay approximately $12 million in restitution to affected customers, and to customers who were charged excessive markups. The founder of the broker-dealer was personally fined $250,000 and suspended for one year from the securities industry and two years from acting as a principal.

On November 22, 2011, FINRA entered into a settlement with a second broker-dealer for using misleading, unwarranted or exaggerated marketing materials in the sale of a non-traded REIT. The broker-dealer was ordered to pay a fine of $300,000, and has neither admitted nor denied the charges.

On December 12, 2012, the Massachusetts Securities Division, or the Division, filed an administrative complaint against a third broker-dealer, accusing it of violating Massachusetts securities laws in the sale of non-traded REIT shares. On February 6, 2013, the Division and the broker-dealer entered into a consent order that required, among other things, a $2.0 million payment by the broker-dealer to Massachusetts investors, payment of a $500,000 fine and an agreement by the broker-dealer to reform its selling practices.

The proceedings outlined above, none of which involved us or our affiliates, have received substantial publicity and could have a negative impact on the non-traded REIT industry, on which we substantially rely.

In addition, both the SEC and FINRA issued bulletins in 2011 and 2012, respectively, urging investors to conduct careful reviews before investing in non-traded REITS. The fact that the direct investment program industry has attracted regulatory notice may negatively affect our results of operations if investors react by reducing their exposure to direct investment products.

The tax benefits afforded to investors by the REIT structure are under review by the U.S. Congress. If lawmakers were to change the tax status of REITs, the direct investment industry may suffer from a diminished ability to raise capital, and our business may be adversely affected as a result.

The tax benefits afforded to investors by the REIT structure are under review by the U.S. Congress. A REIT is an entity that avoids the “double taxation” treatment of income that normally results from investments in a corporation because a REIT generally is not subject to U.S. federal corporate income and excise taxes on that portion of its net income distributed to its stockholders, provided that certain U.S. federal income tax requirements are satisfied. The Committee on Ways and Means of the U.S. House of Representatives recently has stated that it is reviewing the REIT tax exemption. We believe that the tax treatment of REITs has historically attracted investors to the asset class, and that a change to such tax treatment may change investors’ evaluation of the merits of REITs. Our wholesale broker-dealer currently distributes nine non-traded REIT products, eight of which are sponsored by American Realty Capital, has served as dealer manager to one exchange-traded REIT, and recently has successfully closed two non-traded REIT offerings. Moreover, our business strategy depends on our continued distributing and servicing of non-traded REITs, which make up the majority of the direct investment industry by market share. If lawmakers were to change the tax status of REITs, the direct investment industry may suffer from a diminished ability to raise capital, and our business may be adversely affected as a result.

Financial services firms have been subject to increased scrutiny over the last several years, increasing the risk of financial liability and reputational harm resulting from adverse regulatory actions.

The financial services industry has experienced increased scrutiny from a variety of regulators, including the SEC, FINRA, other self-regulatory organizations and state attorneys general. Penalties and fines sought by regulatory authorities have increased substantially over the last several years. This regulatory and enforcement environment has created uncertainty with respect to a number of transactions that had historically been entered into by financial services firms and that were generally believed to be permissible and appropriate. We may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. Each of the regulatory bodies with jurisdiction over

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us has regulatory powers dealing with many aspects of financial services, including, but not limited to, the authority to fine us and to grant, cancel, restrict or otherwise impose conditions on the right to carry on particular businesses. For example, a failure to comply with the obligations imposed by the Exchange Act on broker-dealers or the Investment Advisers Act on investment advisers, including record-keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities, or by the Investment Company Act of 1940, or the Investment Company Act, could result in investigations, sanctions and reputational damage. The Dodd-Frank Act may result in substantial new compliance costs. We also may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. regulatory authorities, FINRA or other self-regulatory organizations that supervise the financial markets. Substantial legal liability or significant regulatory action against us could have adverse financial effects on us or harm our reputation, which could harm our business prospects.

Our wholesale broker-dealer is registered as a broker-dealer under the Exchange Act and is a member of, and subject to, regulation, examination and supervision by the SEC, FINRA, other self-regulatory organizations and state securities regulators. Broker-dealers are subject to regulations that cover all aspects of the securities business, including, sales methods, trade practices, use and safekeeping of customers’ funds and securities capital structure, recordkeeping and the conduct and qualification of officers and employees. Failure to comply with applicable regulations could subject our wholly owned broker-dealer to suspension or revocation of its licenses by the SEC or expulsion from FINRA. Firms in the financial services industry have experienced increased scrutiny and larger potential penalties and fines in recent years from a variety of regulators. This regulatory and enforcement environment has created uncertainty with respect to a number of transactions that had historically been entered into by financial services firms and that were generally believed to be permissible and appropriate. We may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. We also may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC or other regulatory authorities or self-regulatory organizations that supervise the financial markets. Our failure to comply in the future with applicable laws or regulations could result in fines, suspensions of personnel or other sanctions, including revocation of the registration of us or any of our subsidiaries. Even if a sanction imposed against us or our personnel is small in monetary amount, adverse publicity arising from the imposition of sanctions against us by regulators could harm our reputation and cause us to lose existing clients or fail to gain new clients. In addition, financial services firms are subject to numerous conflicts of interests or perceived conflicts. The SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest. Asset management businesses have experienced a number of highly publicized regulatory inquiries concerning market timing, late trading and other activities that focus on the mutual fund industry. These inquiries have resulted in increased scrutiny within the industry and new rules and regulations for mutual funds, investment advisers and broker-dealers. Any failure to comply with applicable regulatory requirements may result in significant regulatory sanctions, client litigation or harm to our reputation, each of which may have an adverse effect on our financial condition.

Financial services firms are subject to numerous conflicts of interests or perceived conflicts. The SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest. We have adopted, and regularly review and update, various policies, controls and procedures to address or limit actual or perceived conflicts. However, appropriately addressing conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to appropriately address conflicts of interest. Our policies and procedures to address or limit actual or perceived conflicts may also result in increased costs and additional operational personnel. Failure to adhere to these policies and procedures may result in regulatory sanctions or litigation against us.

FINRA’s NASD Rule 1017 prohibits a 25% or greater change in the company’s equity ownership or control to any one person or entity absent notice to and the consent of FINRA, and this delay or restriction may hinder our ability to raise capital in a timely manner or permit the exchange by Parent of its Operating Subsidiaries Units (and cancellation of its corresponding shares of our Class B common stock) in excess of 25% of our outstanding Class A common stock.

Upon consummation of this offering, we will have 2,500,000 shares of Class A common stock outstanding, which excludes (i) 24,000,000 shares of Class A common stock reserved for issuance upon the

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exchange of the Operating Subsidiaries Units held by Parent that will be outstanding immediately after this offering (and cancellation of the corresponding shares of our Class B common stock held by Parent), and (ii) 250,000 shares of Class A common stock that will initially be reserved for issuance under an equity plan we intend to adopt. Immediately prior to this offering, all our authorized shares of Class B common stock will be issued to Parent. Initially, Class B common stock will entitle holders to four votes per share. Immediately following this offering, as a result of its ownership of the Class B common stock, Parent will hold 97.5% of the voting rights of the company; provided, however, that our certificate of incorporation will provide that so long as any of our Class B common stock remains outstanding, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock.

FINRA’S NASD Rule 1017 requires that we file an application for approval with FINRA at least 30 days prior to a change in ownership that results in one person or entity directly or indirectly owning or controlling 25% or more of the company’s equity capital. The complete approval process by FINRA of NASD Rule 1017 application may take six months or more to complete.

The required 30-day notice in change in ownership, as well as the FINRA approval process under NASD Rule 1017, may hinder us from raising capital in a timely manner that is equal to the value of 25% or more of our equity capital involving the sale or transfer of such equity ownership to any one person or entity. Further, Parent may not be permitted to sell or exchange its Operating Subsidiaries Units equal to 25% or more of our outstanding Class A common stock to any single person absent notice to FINRA and its final approval as outlined above.

While we may effect a change in ownership after the 30th day following the initial notice to FINRA is provided, FINRA may place interim restrictions on us pursuant to FINRA’S NASD Rule 1014 pending final approval, and there is no guarantee that FINRA will ultimately approve such change in ownership or control. If FINRA does not approve of a change in ownership or control, we may appeal such decision. If a change in ownership lapses or is denied and all appeals have been exhausted or waived by us, we will be required within 60 days thereafter to submit a new application under Rule 1017 or unwind the transaction altogether.

As a result of the foregoing, we may be delayed in or prevented from conducting an equity offering to raise capital for our business.

Difficult market conditions for direct investment offerings can adversely affect our business in many ways, which could materially reduce our revenue or income.

Our business is materially affected by conditions in the global financial markets and economic conditions throughout the world. The future market and economic climate may deteriorate because of many factors beyond our control, including rising interest rates, the rate of inflation, currency exchange rates, changes in the regulatory environment, wars, acts of terrorism or political uncertainty. Difficult market and economic conditions, the level and volatility of interest rates, investor sentiment and political events have in the past adversely affected and may in the future adversely affect our business and profitability in many ways. For example, our revenues are directly related to the volume and value of investment banking and brokerage transactions in which we are involved. During periods of unfavorable market or economic conditions, the volume and size of these transactions may decrease, thereby reducing the demand for our services and increasing price competition among financial services companies seeking those engagements. Our results of operations would be adversely affected by any reduction in the volume or size of corporate finance transactions. Similarly, weakness in equity markets and diminished trading volume of securities could adversely impact our sales and trading business. Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in revenue relating to changes in market and economic conditions.

Significantly expanded corporate governance and public disclosure requirements may result in fewer public offerings and discourage companies from engaging in capital market transactions, which may reduce the number of investment banking opportunities available for us to pursue.

Highly publicized financial scandals in recent years have led to investor concerns over the integrity of the U.S. financial markets, and have prompted the U.S. Congress, the SEC and NYSE to significantly expand corporate governance and public disclosure requirements. To the extent that private companies, in order to

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avoid becoming subject to these new requirements, decide to forego public offerings or elect to be listed on foreign markets, our underwriting business may be adversely affected. In addition, provisions of Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, and the corporate governance rules imposed by self-regulatory organizations and stock exchanges have diverted the attention of many companies away from capital markets transactions, including securities offerings and acquisition and disposition transactions. In particular, companies that either are or are planning to become public companies are incurring significant expenses in complying with the SEC reporting requirements relating to internal controls over financial reporting, and companies that disclose material weaknesses in such controls under the new standards may have greater difficulty accessing the capital markets. The Dodd-Frank Act contains several provisions that will have a direct impact on the operations of one of our operating subsidiaries, Realty Capital Securities, LLC, which operates an investment banking and capital markets business through its RCS Capital division. The legislation contains changes to the laws governing, among other things, Federal Deposit Insurance Corporation assessments, mortgage originations, holding company capital requirements and risk retention requirements for securitized loans. The full impact of the Dodd-Frank Act on our business and operations will not be known for years until regulations implementing the statute are written and adopted. However, the Dodd-Frank Act may have a material impact on our operations, particularly through increased regulatory burden and compliance costs. These factors, in addition to adopted or proposed accounting and disclosure changes, may have an adverse effect on our business.

Our exposure to legal liability is significant, and damages and other costs that we may be required to pay in connection with litigation and regulatory inquiries, and the reputational harm that could result from legal action against us, could adversely affect our businesses.

We face significant legal risks in our businesses and, in recent years, the volume of claims and amount of damages sought in litigation and regulatory proceedings against financial institutions have been increasing. These risks include potential liability under securities or other laws for materially false or misleading statements made in connection with securities offerings and other transactions, employment claims, potential liability for “fairness opinions” and other advice we provide to participants in strategic transactions and disputes over the terms and conditions of complex trading arrangements.

Due to the work of our investment banking business, we depend to a large extent on our reputation for integrity and professionalism to attract and retain clients. As a result, if a client is not satisfied with our services, it may be more damaging to our business than to other businesses. Moreover, our role as advisor to our clients on important underwriting or mergers and acquisitions transactions involves complex analysis and the exercise of professional judgment, including rendering “fairness opinions” in connection with mergers and acquisitions and other transactions. Therefore, our activities may subject us to the risk of significant legal liabilities to our clients and aggrieved third parties, including our clients’ stockholders who could bring securities class action suits against us. There can be no assurance that indemnities from our clients and provisions to limit our exposure to legal claims relating to our services will protect us or be enforceable in all cases. As a result, we may incur significant legal and other expenses in defending against litigation and may be required to pay substantial damages for settlements and adverse judgments. Substantial legal liability or significant regulatory action against our investment banking business could harm our results of operations or harm our reputation, which could adversely affect our business and prospects.

Employee misconduct, which is difficult to detect and deter, could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm.

Recently, there have been a number of highly publicized cases involving fraud or other misconduct by employees in the financial services industry, and there is a risk that our employees could engage in misconduct that adversely affects our business. For example, we often deal with confidential matters of great significance to our clients. If our employees were to improperly use or disclose confidential information provided by our clients, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial position, current client relationships and ability to attract future clients. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in all cases. If our employees engage in misconduct, our business could be adversely affected.

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If we were deemed an investment company under the Investment Company Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have an adverse effect on our business.

We are not an investment company under the Investment Company Act and we intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the Investment Company Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and would harm our business and the price of our common stock.

Risks Related to our Structure

We have elected to take advantage of the “controlled company” exemption to the corporate governance rules for NYSE-listed companies, which could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Because we qualify as a “controlled company” under the corporate governance rules for NYSE-listed companies, we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or an independent nominating function. In light of our status as a controlled company, our board of directors has determined not to have an independent nominating function and has chosen to have the full board of directors be directly responsible for nominating members of our board, and we have elected not to have a majority of our board of directors be independent and not to have a compensation committee. Accordingly, should the interests of our controlling stockholder differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all the corporate governance rules for NYSE-listed companies. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law.

Following completion of this offering, we intend to pay cash dividends to our Class A stockholders on a quarterly basis, beginning in the third quarter of 2013. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In addition, as a holding company, we will be dependent upon the ability of our operating subsidiaries to generate earnings and cash flows and distribute them to us so that we may pay dividends to our stockholders. We expect Parent to cause our operating subsidiaries to make distributions to their members, including us. However, their ability to make such distributions will be subject to their operating results, cash requirements and financial condition, the applicable provisions of Delaware law which may limit the amount of funds available for distribution to their members, their compliance with covenants and financial ratios related to existing or future indebtedness, and their other agreements with third parties. In addition, each of the companies in the corporate chain must manage its assets, liabilities and working capital in order to meet all its cash obligations, including the payment of dividends or distributions. As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our Class A common stock.

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and are eligible to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that are normally applicable to public companies. We could remain an “emerging growth company” for up to five years, or until the earliest of (1) the last day of the first fiscal year in which we have total annual gross revenue of $1 billion or more, (2) December 31 of the fiscal year that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act (which would occur if the market value of our common stock held by non-affiliates exceeds $700 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months) or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

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Under the JOBS Act, emerging growth companies are not required to (1) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting, pursuant to Section 404 of Sarbanes-Oxley, (2) comply with new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, which may require mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor must provide additional information about the audit and the issuer’s financial statements, (3) comply with new audit rules adopted by the PCAOB after April 5, 2012 (unless the SEC determines otherwise), (4) provide certain disclosures relating to executive compensation generally required for larger public companies, or (5) hold stockholder advisory votes on executive compensation. Other than as set forth in the following paragraph, we have not yet made a decision as to whether to take advantage of any or all the JOBS Act exemptions that are applicable to us. If we avail ourselves of any of the remaining exemptions from various reporting requirements, it may be more difficult for investors and securities analysts to evaluate us and we do not know if some investors will find shares of our Class A common stock less attractive as a result, which may result in a less active trading market for shares of our Class A common stock or a more volatile stock price.

Additionally, the JOBS Act provides that an “emerging growth company” may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means that an “emerging growth company” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, we are electing to “opt out” of such extended transition period, and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

Parent’s ability to control our board of directors may make it difficult for us to recruit high-quality independent directors.

So long as Parent beneficially owns shares of our common stock representing at least a majority of the votes entitled to be cast by the holders of outstanding voting stock, Parent can effectively control and direct our board of directors. Further, the interests of Parent and our other stockholders may diverge. Under these circumstances, persons who might otherwise accept our invitation to join our board of directors may decline.

We will be required to pay to Parent most of the tax benefit of any depreciation or amortization deductions we may claim as a result of the tax basis step up we receive in connection with the future exchanges of Operating Subsidiaries Units.

Any taxable exchanges by Parent of Operating Subsidiaries Units for shares of our Class A common stock (and cancellation of its corresponding shares of our Class B common stock) are expected to result in increases in the tax basis in the tangible and intangible assets of the operating subsidiaries connected with such Operating Subsidiaries Units. The increase in tax basis is expected to reduce the amount of tax that we would otherwise be liable for in the future, although the IRS might challenge all or part of this tax basis increase, and a court might sustain such a challenge.

We will enter into a tax receivable agreement with Parent, pursuant to which we will agree to pay Parent 85% of the amount of the reduction, if any, in U.S. federal, state and local income tax liabilities that we realize (or are deemed to realize upon an early termination of the tax receivable agreement or a change of control, both discussed below) as a result of these increases in tax basis created by Parent’s exchanges. The actual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending on a number of factors, including the timing of Parent’s exchanges, the price of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of our income and the tax rates then applicable. See “Relationships and Related Party Transactions — Tax Receivable Agreement.”

Moreover, if we exercise our right to terminate the tax receivable agreement early, we will be obligated to make an early termination payment to Parent, or its transferees, based upon the net present value (based upon certain assumptions and deemed events set forth in the tax receivable agreement, including the assumption that we would have enough taxable income in the future to fully utilize the tax benefit resulting

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from any increased tax basis that results from an exchange and that any Operating Subsidiaries Units that Parent or its transferees own on the termination date are deemed to be exchanged (and the corresponding shares of our Class B common stock cancelled) on the termination date) of all payments that would be required to be paid by us under the tax receivable agreement. If certain change of control events were to occur, we would be obligated to make payments to Parent using certain assumptions and deemed events similar to those used to calculate an early termination payment.

We will not be reimbursed for any payments previously made under the tax receivable agreement if such basis increase is successfully challenged by the IRS. As a result, in certain circumstances, payments could be made under the tax receivable agreement in excess of our cash tax savings.

The dual class structure of our common stock has the effect of concentrating voting control in Parent and, indirectly, in those who control Parent; this will limit or preclude your ability to influence corporate matters.

Initially, the holder of our Class B common stock will be entitled to four votes per share, and holders of our Class A common stock, which is the stock we are offering in our initial public offering, will be entitled to one vote per share; provided, however, that our certificate of incorporation will provide that so long as any of our Class B common stock remains outstanding, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock, and thereby control the company. As the stockholder of shares of our Class B common stock, Parent initially will hold 97.5% of the voting power of our outstanding capital stock following our initial public offering. As a result, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and be able to control all matters submitted to our stockholders for approval for the foreseeable future. In addition, so long as Parent, or its successor-in-interest, beneficially owns shares of our common stock representing at least a majority of the votes entitled to be cast by the holders of outstanding voting stock, Parent will be able to elect all the members of our board of directors. As a result, this concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future and Parent will have the ability to control all matters affecting us, including:

the composition of our board of directors and, through our board of directors, any determination with respect to our business plans and policies;
any determinations with respect to mergers, acquisitions and other business combinations;
our acquisition or disposition of assets;
our financing activities;
certain changes to our certificate of incorporation;
amendments to any agreements between us and Parent;
corporate opportunities that may be suitable for us and Parent;
determinations with respect to enforcement of rights we may have against third parties;
the payment of dividends, if any, on our common stock; and
the number of shares available for issuance under our stock plans for our prospective and existing employees.

If Parent does not provide any requisite consent allowing us to conduct such activities when requested, we will not be able to conduct such activities and, as a result, our business and our operating results may be harmed. The individuals who control Parent, Messrs. Schorsch and Kahane, also control our Manager, which means that these individuals may have an even greater influence over our affairs than their control over Parent alone would dictate.

In the event Parent is acquired or otherwise undergoes a change of control, any acquiror or successor will be entitled to exercise the voting control and contractual rights of Parent, and may do so in a manner that could vary significantly from that of Parent.

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Our inability to resolve favorably any disputes that arise between us and Parent with respect to our past and ongoing relationships may result in a significant reduction of our revenue.

Disputes may arise between Parent and us in a number of areas relating to our ongoing relationships, including:

labor, tax, employee benefit, indemnification and other matters arising from the reorganization of Parent’s subsidiaries and this offering;
employee retention and recruiting;
business combinations involving us;
our ability to engage in activities with certain potential customers;
sales or dispositions by Parent of all or any portion of its ownership interest in us; and
business development or marketing activities which may require the consent of Parent.

We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party. The agreements we will enter into with Parent may be amended upon agreement between the parties. While we are controlled by Parent, we may not have the leverage to negotiate amendments to these agreements, if required, on terms as favorable to us as those we would negotiate with an unaffiliated third party.

Risks Related to this Offering

There is no existing market for our Class A common stock, and we do not know if one will develop, which may cause our Class A common stock to trade at a discount from its initial offering price and make it difficult to sell the shares you purchase.

Prior to this offering, there has not been a public market for our Class A common stock and we cannot predict the extent to which investor interest in us will lead to the development of an active trading market on NYSE or otherwise, or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling your shares of Class A common stock at an attractive price, or at all. The initial public offering price for our Class A common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell shares of our Class A common stock at prices equal to or greater than the price you paid in this offering.

The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and substantial losses for our stockholders.

Even if an active trading market develops, the market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume on our Class A common stock may fluctuate and cause significant price variations to occur. If the market price of our Class A common stock declines significantly, you may be unable to resell your shares of Class A common stock at or above your purchase price, if at all. We cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our Class A common stock, or result in fluctuations in the price or trading volume of our Class A common stock, include:

adverse publicity about the direct investment program industry, generally, or individual scandals specifically;
general market and economic conditions;
variations in our quarterly operating results;
failure to meet the market’s earnings expectations;
departures of our principals or additions/departures of other key personnel;
adverse market reaction to any indebtedness we may incur or securities we may issue in the future;

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actions by stockholders;
changes in market valuations of similar companies;
actual or anticipated poor performance in our underlying investment strategies;
publication of research reports about us or the securities industry, or the failure of securities analysts to cover our Class A common stock after this offering;
changes or proposed changes in laws or regulation, or differing interpretations thereof, affecting our business, or enforcement of these laws and regulations, or announcements relating to these matters; and
litigation and governmental investigations.

Future sales of our Class A common stock in the public market or in acquisitions of businesses could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.

The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock by Parent after completion of this offering, or the perception that such sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to raise additional capital by selling equity securities in the future, at a time and price that we deem appropriate. Parent does not intend to exchange any of its Operating Subsidiaries Units for shares of any of our Class A common stock during the 180 days following the date of this prospectus.

Pursuant to the lock-up agreements described under “Underwriting (Conflicts of Interest),” our existing stockholders, directors and officers may not sell, otherwise dispose of or hedge any shares of our Class A common stock or securities convertible or exercisable into or exchangeable for shares of Class A common stock, subject to certain exceptions, for the 180-day period following the date of this prospectus, without the prior written consent of JMP Securities LLC. Pursuant to a registration rights agreement that we will enter into with Parent and Manager, we will agree to use our reasonable best efforts to file registration statements from time to time for the sale of the shares of our Class A common stock, including Class A common stock which is deliverable upon exchange of Operating Subsidiaries Units now or in the future and any equity-based awards granted to our Manager under an equity plan we intend to adopt. See “Relationships and Related Party Transactions — Registration Rights Agreement.”

In addition, we may issue additional shares of our Class A common stock in connection with acquisitions of complementary businesses. See “Use of Proceeds.” Such issuances could result in substantial dilution of the interests of existing holders of Class A common stock.

We cannot predict the size or price of future issuances of our Class A common stock or the effect, if any, that future issuances and sales of shares of our Class A common stock may have on the market price of our Class A common stock. Sales or distributions of substantial amounts of our Class A common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may cause the market price of our Class A common stock to decline. See “Shares Eligible for Future Sale.”

We may acquire, or Parent may cause us to acquire, complementary businesses. If additional shares of our common stock are issued to make such acquisitions, our current stockholders may experience dilution in their holdings and a reduction in stock price. In addition, acquisitions involve numerous risks which could harm our business.

As part of our growth strategy, we may determine to acquire complementary businesses. In addition, through its control of us, Parent may cause us to acquire complementary businesses. Furthermore, Parent may determine to acquire a complementary business itself and later combine that business with us. As a result of its ownership of our Class B common stock, Parent has the ability to control the outcome of all matters submitted to our stockholders for approval. In connection with any acquisition, we may issue a substantial number of shares of our common stock. The issuance of such additional shares of our common stock may result in significant dilution to our existing stockholders and adversely affect the prevailing market price for our common stock. See “Relationships and Related Party Transactions — Acquisition Strategies.”

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In addition, acquisitions involve numerous risks, any of which could harm our business, including: difficulties in integrating the operations, services and personnel of acquired businesses; potential loss of key employees of acquired businesses; inability to maintain the key business relationships and the reputations of acquired businesses; harm to our existing business relationships, brand and reputation; diversion of management’s attention from other business concerns; incurrence of substantial debt that may place strains on our operations; litigation for activities of acquired businesses, including claims from terminated employees, customers, former stockholders or other third parties; costs necessary to establish and maintain effective internal controls for acquired businesses; and increased fixed costs. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results arising from the impairment assessment process. In addition, if an acquired business fails to meet our expectations, our business, results of operations and financial condition may be adversely affected.

Although we intend to evaluate and consider acquisitions of complementary businesses in the future, we have no agreements or understandings with respect to any acquisition at this time.

There will be dilution of the economic interests of our public stockholders upon any exchange by Parent of its Operating Subsidiaries Units for shares of Class A common stock and upon any issuance of equity-based awards to our Manager.

In connection with the closing of this offering, Parent will enter into an exchange agreement with us under which Parent will have the right, from time to time, to exchange its Operating Subsidiaries Units for shares of Class A common stock of our company on a one-for-one basis. Pursuant to the exchange agreement, the parties will have agreed to preserve their relative ownership of the Class A common stock, Class B common stock, Class A Units of our operating subsidiaries and Class B Units of our operating subsidiaries and, accordingly, that the transfer of units of an operating subsidiary to a transferee thereof shall be accompanied by the simultaneous transfer of an equal number of the same class, series or type of units of the other operating subsidiaries to such transfer. In connection with an exchange, a corresponding number of shares of our Class B common stock will be cancelled. The exchange by Parent of Operating Subsidiaries Units for shares of Class A common stock will result in dilution of the economic interests of our public stockholders. Our public stockholders will have no influence over the decision by Parent to exchange its Operating Subsidiaries Units and the resulting dilution of public stockholders’ economic interests.

In addition, we intend to adopt an equity plan under which we may in the future grant equity incentive awards to our Manager, our executive officers, our directors and other employees and independent contractors. Performance-based awards that we grant to our Manager under the Multi-Year Outperformance Agreement, or OPP, will be issued under our equity plan. Issuances of awards under our equity plan may result in dilution of the economic interests of our public stockholders.

You will suffer immediate and substantial dilution and may experience additional dilution in the future.

We expect that the initial public offering price per share of our Class A common stock will be substantially higher than the pro forma net tangible book value per share of our Class A common stock immediately after this offering, and after giving effect to the exchange of all outstanding Operating Subsidiaries Units for shares of our Class A common stock (and corresponding cancellation of all shares of our Class B common stock). As a result, you will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. At the initial public offering price of $20.00, you will incur immediate and substantial dilution in an amount of $17.97 per share of our Class A common stock. See “Dilution.”

We will compete for investors with programs sponsored by American Realty Capital, which could adversely affect the amount of capital we are able to raise in this offering.

American Realty Capital, which is under common ownership with Parent, is currently the sponsor of 10 public offerings of non-traded REIT shares, which offerings will be ongoing during our offering period. These programs all have filed registration statements for the offering of common stock and either are or intend to elect to be taxed as REITs. These offerings are taking place concurrently with our offering, and affiliates of our principals may sponsor other offerings during our offering period. Our wholesale broker-dealer is the

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exclusive dealer manager for these other offerings. We will compete for investors with these other programs, and the overlap of these offerings with our offering could adversely affect our ability to raise all the capital we seek in this offering and the timing of sales of our shares of Class A common stock.

Fulfilling our public company financial reporting and other regulatory obligations will be expensive and time-consuming and may strain our resources.

As a public company, we will be subject to the reporting requirements of the Exchange Act and will be required to implement specific corporate governance practices and adhere to a variety of reporting requirements under Sarbanes-Oxley and the related rules and regulations of the SEC, as well as the rules of NYSE, and will incur additional costs associated with such reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

In accordance with Section 404(a) of Sarbanes-Oxley, our management will be required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. We are in the process of reviewing our internal control over financial reporting and are establishing formal policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential impact and linkage of those risks to specific areas and controls within our organization. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to adverse regulatory consequences and there could be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. This could have a material adverse effect on us and lead to a decline in the price of our Class A common stock.

The Exchange Act will require us to file annual, quarterly and current reports with respect to our business and financial condition. Compliance with these requirements will place significant additional demands on our management, legal, accounting and finance staff and on our accounting, financial and information systems and will increase our legal and accounting compliance costs as well as our compensation expense as we will be required to hire additional accounting, finance, legal and internal audit staff with the requisite technical knowledge.

As a public company, we will also need to enhance our investor relations, marketing and corporate communications functions. These additional efforts may strain our resources and divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

Anti-takeover provisions in our amended and restated certificate of incorporation and by-laws could discourage a change of control that our stockholders may favor, which could negatively affect the market price of our Class A common stock.

Provisions in our amended and restated certificate of incorporation and by-laws may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our stockholders. For example, our amended and restated certificate of incorporation, which will be in effect at the time this offering is consummated, will authorize the issuance of preferred stock that could be issued by our board of directors to thwart a takeover attempt. In addition, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock. The market price of our Class A common stock could be adversely affected to the extent that the provisions of our amended and restated certificate of incorporation and by-laws will discourage potential takeover attempts that our stockholders may favor. See “Description of Capital Stock” for additional information on the anti-takeover measures applicable to us.

Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. Our failure to apply these funds effectively could have a material adverse effect on our business and cause the price of our common stock to decline.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and in other sections of this prospectus that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions, may include projections of our future financial performance, our anticipated growth strategies, descriptions of new business initiatives and anticipated trends in our business, including:

adverse developments in the direct investment program industry;
deterioration in the business environment in the specific sectors of the economy in which we focus or a decline in the market for securities of companies within these sectors;
substantial fluctuations in our financial results;
our ability to retain our senior professionals;
pricing and other competitive pressures;
changes in laws and regulations and industry practices that adversely affect our sales and trading business;
incurrence of losses in the future;
the singular nature of our capital markets and strategic advisory engagements;
competition from larger firms;
larger and more frequent capital commitments in our wholesale broker-dealer and investment banking businesses;
limitations on our access to capital;
malfunctioning or failure in our operations and infrastructure;
strategic investments or acquisitions and joint venture or our entry into new business areas;
failure to achieve and maintain effective internal controls;
our ability to make, on a timely or cost effective basis, the changes necessary to operate as an independent company;
our ability to adequately perform oversight or control functions that have been performed in the past by Parent; and
increased costs due to our becoming a public company separate from Parent.

These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors.”

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations.

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OUR STRUCTURE AND REORGANIZATION

The diagram below depicts our organizational structure immediately after the consummation of this offering and related transactions. After the consummation of this offering and related transactions, (i) 2,500,000 shares of our Class A common stock will be outstanding (assuming that the over-allotment option granted to the underwriters has not been exercised), (ii) 2,500,000 Class A Units of each of our operating subsidiaries will be outstanding, (iii) 24,000,000 shares of our Class B common stock will be outstanding, and (iv) 24,000,000 Class B Units of each of our operating subsidiaries will be outstanding.

[GRAPHIC MISSING]

(1) Under our directed share program, at our request, the underwriters have reserved up to 20% of the shares of Class A common stock being offered in this offering for sale to our interested directors, officers, employees and other individuals associated with us and members of their families, as well as any entities controlled by them, at the initial public offering price set forth on the cover of this prospectus. No underwriting discounts or commissions will be payable to the underwriters in connection with such sales. To the extent our interested directors, officers, employees and other individuals associated with us and members of their families, as well as any entities controlled by them, decide to buy any shares of our Class A common stock in this offering, the percentage of shares of our Class A common stock held by the public stockholders will be reduced. See “Underwriting (Conflicts of Interest) — Directed Share Program.”
(2) RCS Capital Corporation, RCAP Holdings, LLC (formerly known as AR Capital, LLC and subsequently RCS Capital, LLC) and RCS Capital Management, LLC are directly or indirectly controlled by Messrs. Schorsch and Kahane, and will continue to be following this offering and after giving effect to the reorganization transactions.
(3) As a result of its ownership of the shares of our Class B common stock, Parent will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors, for the foreseeable future.
(4) 100% Class B Units. Class B Units have no voting rights and 90.6% economic rights.
(5) 100% Class A Units. Class A Units have 100% voting rights and 9.4% economic rights.

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In the future, we may engage in additional corporate reorganization transactions, including interposing an intermediate holding company as the direct owner of the operating subsidiaries for corporate and tax efficiencies.

The Operating Subsidiaries

As a holding company, we conduct all our business activities through our operating subsidiaries. Prior to this offering, Parent held a 100% interest in each of the operating subsidiaries. Prior to this offering, we will amend and restate the operating agreements of the operating subsidiaries to, among other things, modify their capital structure by creating two new classes of units of each such operating subsidiary called “Class A Units” and “Class B Units.” Upon the effectiveness of the amended and restated operating agreements of the operating subsidiaries, 100% of the then-outstanding Class A Units of each operating subsidiary will be issued to us and 100% of the then-outstanding Class B Units of each operating subsidiary will be issued to Parent. See “Relationships and Related Party Transactions — Amended and Restated Limited Liability Company Agreements of the Operating Subsidiaries.” The Class A Units issued to us will entitle us to voting and economic rights (including rights to distributions upon liquidation). The Class B Units issued to Parent will entitle Parent to economic rights (including rights to distributions upon liquidation), but will not entitle Parent to voting rights. The amended and restated operating agreements of the operating subsidiaries also provide, among other things, that we are the managing member of the operating subsidiaries, and that the right to manage, control and conduct the business and affairs of the operating subsidiaries and to take any and all actions on their behalf is vested completely and exclusively in us, in our capacity as managing member.

Following such steps, the operating subsidiaries will be 90.6% owned by Parent and 9.4% owned by us. Upon completion of this offering, there will be approximately 2,500,000 Class A Units and 24,000,000 Class B Units of each operating subsidiary issued and outstanding.

RCS Capital Corporation

Parent, our parent company and existing stockholder, owns all our outstanding capital stock, consisting of 100 shares of common stock. Immediately prior to this offering, we will amend and restate our certificate of incorporation to authorize two classes of common stock, Class A common stock and Class B common stock, each having the terms described in “Description of Capital Stock.”

Class A Shares.  Shares of our Class A common stock will be issued to the public in this offering. Class A common stock will entitle holders to one vote per share and full economic rights (including rights to dividends, if any, and distributions upon liquidation). Immediately following this offering, holders of our Class A common stock will hold 100% of the economic rights and 2.5% of the voting rights of the company.

Class B Shares.  Parent will own such number of Class B Units of each operating subsidiary that is equal to the number of outstanding shares of our Class B common stock. Immediately prior to this offering, all our authorized shares of Class B common stock will be issued to Parent, in an amount equal to the number of Class B Units to be issued concurrently to Parent by each operating subsidiary. Initially, Class B common stock will entitle holders to four votes per share; provided, however, that our certificate of incorporation will provide that so long as any of our Class B common stock remains outstanding, the holders of our Class B common stock always will have a majority of the voting power of our outstanding common stock, and thereby control the company. Class B common stock will have no economic rights (including no rights to dividends and distributions upon liquidation). Immediately following this offering, Parent, as holder of our Class B common stock, will hold 0% of the economic rights and 97.5% of the voting rights of the company.

Related Party Agreements

Exchange Agreement.  In connection with the closing of this offering, we will enter into an exchange agreement with Parent under which, subject to certain requirements, including notice requirements, Parent and its transferees will have the right, from time to time, to exchange their Operating Subsidiaries Units, which represent ownership rights in the operating subsidiaries, for shares of Class A common stock of our company on a one-for-one basis. Pursuant to the exchange agreement, the parties will have agreed to preserve their relative ownership of the Class A common stock, Class B common stock, Class A Units of our operating subsidiaries and Class B Units of our operating subsidiaries and, accordingly, that the transfer of units of an

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operating subsidiary to a transferee thereof shall be accompanied by the simultaneous transfer of an equal number of the same class, series or type of units of the other operating subsidiaries to such transfer. In connection with an exchange, a corresponding number of shares of our Class B common stock will be cancelled. Parent does not intend to exchange any of its Operating Subsidiaries Units for shares of our Class A common stock during the 180 days following the date of this prospectus. Any such exchange by Parent will result in dilution of the economic interests of our public stockholders. Any exchange of Operating Subsidiaries Units generally will be a taxable event for Parent. As a result, at any time following the expiration of the underwriters’ lock-up, 180 days after the date of this prospectus, subject to extension as described under “Underwriting (Conflicts of Interest),” Parent will be permitted to sell shares of Class A common stock. Accordingly, Parent will, over time, have the ability to convert its illiquid ownership interests in the operating subsidiaries into Class A common stock that can be more readily sold on NYSE. See “Relationships and Related Party Transactions — Exchange Agreement.”

Tax Receivable Agreement.  The exchange of Operating Subsidiaries Units for Class A common stock by Parent (and cancellation of its corresponding shares of our Class B common stock) is expected to generate tax savings for us. We will enter into an agreement with Parent that will provide for the payment by us to Parent of 85% of the amount of reduction, if any, in U.S. federal, state and local income tax liabilities that we realize as a result of any exchanges referred to above by Parent. See “Relationships and Related Party Transactions — Tax Receivable Agreement.”

Registration Rights Agreement.  In connection with this offering, we will enter into a registration rights agreement with Parent and Manager to provide customary registration rights, including demand registration rights and piggyback registration rights. See “Relationships and Related Party Transactions — Registration Rights Agreement.”

Management Agreement.  We, together with our operating subsidiaries, will enter into a management agreement with our Manager effective upon the closing of this offering. Pursuant to the management agreement, our Manager will implement our business strategy, as well as the business strategy of our operating subsidiaries, and perform executive and management services for us and our operating subsidiaries, subject to oversight, directly or indirectly, by our board of directors.

The initial term of the management agreement will end ten years after the closing of this offering, with automatic five-year renewal terms. During the initial term, we, together with our operating subsidiaries, may terminate the management agreement only for cause. Cause is defined in the management agreement as:

our Manager’s continued breach of any material provision of the management agreement following a period of 30 days after written notice thereof (or 45 days after written notice of such breach if the Manager has taken steps to cure such breach within 30 days of the written notice);
the occurrence of certain events with respect to the bankruptcy or insolvency of our Manager, including an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition;
any change of control of our Manager which a majority of our independent directors determines is materially detrimental to us and the operating subsidiaries;
our Manager’s bad faith, willful misconduct or gross negligence; provided, however, that if such bad faith, willful misconduct or gross negligence is caused by an employee of the Manager or one of its affiliates and our Manager takes all necessary and appropriate action against such person and cures the damage caused by such actions within 30 days of the Manager’s knowledge of its commission, the management agreement shall not be terminable; and
the dissolution of our Manager.

Effective at the expiry of the initial ten-year term or any subsequent five-year renewal term, we, together with our operating subsidiaries, may terminate the management agreement “without cause” upon the affirmative vote of at least two-thirds of our independent directors based upon: (1) our Manager’s unsatisfactory performance that is materially detrimental to us, or (2) our determination that the management fees, incentive fees and performance-based awards payable to our Manager are not fair, subject to our Manager’s right to prevent termination based on unfair fees or awards by accepting a reduction of

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management fees, incentive fees or awards agreed to by at least two-thirds of our independent directors. We will provide our Manager with 180 days’ prior notice of such a termination. Our Manager may also decline to renew the management agreement at will by providing us with 180 days’ written notice.

We, together with our operating subsidiaries, will pay our Manager (i) a management fee in an amount equal to 10% of the aggregate GAAP net income (if such amount is a positive number) of our three operating subsidiaries (and of any additional subsidiaries that we may form or potentially acquire after the date of this offering from time to time, as we anticipate will be provided in an amendment to the management agreement at any such time), calculated and payable quarterly in arrears, subject to the aggregate GAAP net income of our three operating subsidiaries being positive for the current and three preceding calendar quarters, and (ii) an incentive fee that is based on our earnings and our stock price, as further described under “Our Manager and American Realty Capital — Management Agreement.”

Outperformance Agreement.  We will enter into the OPP with our Manager. The OPP will provide for performance-based bonus awards to our Manager, which is intended to further align our Manager’s interests with those of the company and its stockholders. For a more complete description of the OPP, see “Management — 2013 Manager Multi-Year Outperformance Agreement.”

RCS Advisory Services, LLC — American Realty Capital Services Agreement.  Our transaction management services provider will enter into a services agreement with American Realty Capital, pursuant to which it will provide American Realty Capital and its subsidiaries with transaction management services (including, without limitation, transaction management, due diligence, event coordination and marketing services) among others, in connection with American Realty Capital’s performance of services to certain American Realty Capital-sponsored companies. The agreement will provide for an initial term of ten years, with automatic renewal for successive five-year periods, in each case unless either party provides written notice of non-renewal to the other party at least 90 days prior the expiration of the term. In addition, the agreement will terminate upon the earlier to occur of: (i) American Realty Capital’s delivery to our transaction management services provider of a notice of non-compliance with its obligations under the agreement and the failure of the parties to resolve the matters referred to in the non-compliance notice; and (ii) by a party impacted by a force majeure-related delay, if the force majeure results in performance being delayed by greater than 60 days.

American Realty Capital — Operating Subsidiaries Services Agreement.  American Realty Capital will enter into a services agreement with our operating subsidiaries, pursuant to which American Realty Capital and its subsidiaries will provide our operating subsidiaries with information technology, human resources and accounting services, among others, as well as office space. The agreement will provide for an initial term of ten years, with automatic renewal for successive five-year periods, in each case unless either party provides written notice of non-renewal to the other party at least 90 days prior to the expiration of the term. In addition, the agreement will terminate upon the earlier to occur of: (i) delivery by our operating subsidiaries to American Realty Capital of a notice of non-compliance with its obligations under the agreement and the failure of the parties to resolve the matters referred to in the non-compliance notice; and (ii) by a party impacted by a force majeure-related delay, if the force majeure results in performance being delayed by greater than 60 days.

Equity Plan.  We intend to adopt an equity plan under which we may in the future grant equity incentive awards to our Manager, our executive officers, our directors and other employees and independent contractors. Performance-based awards that we grant to our Manager under the OPP will be issued under our equity plan. See “Management — Equity Plan.”

Ownership and Management

As a result of the transactions described above, which we collectively refer to as the “reorganization” or the “reorganization transactions” and following the completion of this offering:

we will become the managing member of the operating subsidiaries and thereby will control the management of the operating subsidiaries. However, any issuance by the operating subsidiaries of equity interests (other than Class A Units in certain cases) will require the consent of a majority in interest of the holders of the Class B Units. The rights of a member of any of the operating

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subsidiaries may not be disproportionately adversely affected without the consent of such member. We will have a 9.4% economic interest in the operating subsidiaries as well as a 100% voting interest, while Parent will have a 90.6% economic interest in them but no voting interest. We will consolidate the financial results of the operating subsidiaries and will record a non-controlling interest on our balance sheet for the economic interest in it held by the other existing members, which initially will be Parent;
Parent will initially hold 24,000,000 shares of our Class B common stock and 24,000,000 Class B Units, and we will hold 2,500,000 Class A Units;
through its holdings of our Class B common stock, Parent initially will have 97.5% of the voting power in RCS Capital Corporation, and will continue to hold a majority of the voting power in RCS Capital Corporation for the foreseeable future;
the new investors will collectively have 2.5% of the voting power in RCS Capital Corporation (or 2.9% if the underwriters exercise in full the over-allotment option), although, to the extent our interested directors, officers, employees and other individuals associated with us and members of their families, as well as any entities controlled by them, decide to buy any of the up to 20% of the shares of our Class A common stock being offered by this prospectus that are reserved under our directed share program, the voting power in our company held by the public stockholders will be reduced; and
the Operating Subsidiaries Units held by Parent are exchangeable for shares of our Class A common stock on a one-for-one basis. Pursuant to the exchange agreement, the parties will agree to preserve their relative ownership of the Class A common stock, Class B common stock, Class A Units of our operating subsidiaries and Class B Units of our operating subsidiaries and, accordingly, that the transfer of units of an operating subsidiary to a transferee thereof shall be accompanied by the simultaneous transfer of an equal number of the same class, series or type of units of the other operating subsidiaries to such transfer. In connection with an exchange, a corresponding number of shares of our Class B common stock will be cancelled. The exchange of Operating Subsidiaries Units for shares of our Class A common stock will reduce our Class B common stockholder’s voting power by three votes per share since the votes represented by the cancelled shares of our Class B common stock will be replaced with the votes represented by the shares of Class A common stock for which such Operating Subsidiaries Units are exchanged.

Holding Company Structure

We are a holding company and, immediately after the consummation of the reorganization transactions and this offering, our sole assets will be our 9.4% equity interest in each of the operating subsidiaries. Our only business following this offering will be to act as a member of the operating subsidiaries, and, as such, we will consolidate their financial results into our consolidated financial statements.

The company will own such number of Class A Units of each operating subsidiary that is equal to the number of outstanding shares of our Class A common stock. In addition, you should note that:

a share of Class B common stock cannot be transferred, except in connection with an exchange of an Operating Subsidiaries Unit for a share of our Class A common stock pursuant to the Exchange Agreement. Further, an Operating Subsidiaries Unit cannot be exchanged for a share of our Class A common stock without the corresponding share of our Class B common stock being delivered together at the time of exchange, at which time, such Class B common stock will be automatically cancelled; and
we do not intend to list our Class B common stock on any stock exchange.

As a member of each operating subsidiary, we incur U.S. federal, state and local income taxes on our allocable share of any of each operating subsidiary’s net taxable income. The operating agreement of each operating subsidiary provides that it shall make quarterly cash distributions on a pro rata basis to its members at least to the extent necessary to provide funds to pay the members’ tax obligations (calculated at an assumed tax rate), if any, with respect to the earnings of the respective operating subsidiary. See “Relationships and Related Party Transactions — Amended and Restated Limited Liability Company Agreements of the Operating Subsidiaries.”

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As a result of a U.S. federal income tax election made by each operating subsidiary, the income tax basis of the assets of each operating subsidiary connected with the Operating Subsidiaries Units we acquire upon a taxable exchange with Parent will be adjusted to reflect the amount that we have paid for the Operating Subsidiaries Units. We intend to enter into an agreement with Parent that will provide for the payment by us to Parent of 85% of the amount of reduction, if any, in U.S. federal, state and local income tax liabilities that we realize from our increased tax basis in the assets of the operating subsidiaries created by Parent’s exchanges and the U.S. federal income tax election referred to above. See “Relationships and Related Party Transactions — Tax Receivable Agreement.”

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USE OF PROCEEDS

We estimate that the net proceeds from the sale of shares of our Class A common stock by us in this offering will be approximately $44.6 million, or approximately $51.6 million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, based on the initial public offering price of $20.00 per share, in each case after deducting the underwriting discounts and estimated offering expenses payable by us.

We intend to use the net proceeds from this offering to expand our lines of business, which consist of our wholesale broker-dealer, our investment banking and capital markets business, our transaction management service provider and our transfer agency business. Because our wholesale broker-dealer has an operating history and our other business lines have a limited or no operating history, we expect a substantial portion of the proceeds to be allocated to the expansion of our newer lines of business, consisting of our investment banking and capital markets business, our transaction management service provider and our transfer agency business. However, we intend to use a portion of such allocation to fund the continued growth of our wholesale broker-dealer. We expect approximately 85% of the net proceeds from this offering to be allocated to such business expansion, unless we identify complementary businesses which we would then intend to acquire. We expect to allocate the remaining approximately 15% of the net proceeds from this offering for general corporate purposes. While we may use a portion of the net proceeds from this offering to acquire complementary businesses, at this time we cannot reasonably anticipate the percentage of net proceeds that we would allocate to such acquisitions. Our board of directors, in the exercise of its fiduciary duties, will ensure that the net proceeds are allocated in a manner that, in its business judgment, will be in the best interest of all our stockholders. Except with respect to the dividends described in “Dividend Policy and Dividends,” we do not anticipate making, and do not anticipate that our operating subsidiaries will make, dividends or distributions in the foreseeable future. Although we explore possibilities for potential acquisition candidates from time to time, currently we do not have any plans to acquire any company or business.

As discussed above, we expect that approximately 85% of the net proceeds from this offering will be allocated among our operating subsidiaries to fund their growth and expansion and approximately 15% will remain with us for working capital purposes, unless we identify a complementary business to acquire. If we do identify such a complementary business, we expect that the appropriate proceeds will be held with us until such time as the prospective acquisition requires their expenditure.

For further information about our potential acquisition strategy, see “Business.”

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DIVIDEND POLICY AND DIVIDENDS

Following this offering, we intend to pay quarterly cash dividends, subject to limitations imposed by Delaware law and in the sole discretion of our board of directors. We expect that our first dividend will be paid in the third quarter of 2013 (in respect of the second quarter of 2013) and will be $0.18 per share of our Class A common stock. We intend to fund our initial dividend, as well as any future dividends, from our portion of distributions made by our operating subsidiaries from their available cash generated from operations. Parent will not be entitled to any cash dividends in its capacity as the holder of our Class B common stock, but will, in its capacity as a member of the operating subsidiaries, participate on a pro rata basis in distributions by the operating subsidiaries and will, in its capacity as a holder of shares of our Class A common stock following any exchange of its Operating Subsidiaries Units (and cancellation of its corresponding shares of our Class B common stock), be entitled to cash dividends that will decrease the proportion of our dividends that will be distributed to our public stockholders.

The declaration and payment of all future dividends, if any, will be at the sole discretion of our board of directors. In determining the amount of any future dividends, our board of directors will take into account (i) the financial results of the operating subsidiaries, (ii) our available cash, as well as anticipated cash requirements (including debt servicing), (iii) our capital requirements and the capital requirements of the operating subsidiaries, (iv) contractual, legal, tax and regulatory restrictions on, and implications of, the payment of dividends by us to our stockholders or by the operating subsidiaries to us, (v) general economic and business conditions, and (vi) any other factors that our board of directors may deem relevant.

As a holding company, we will have no material assets other than our ownership of Class A Units and, accordingly, will depend on distributions from our operating subsidiaries to fund any dividends we may pay. We intend to cause the operating subsidiaries to distribute cash to their members, including us, in an amount sufficient to cover dividends, if any, declared by us. If the operating subsidiaries make such distributions, Parent, as the managing member of each operating subsidiary, will be entitled to receive equivalent distributions on a pro rata basis. Following this offering, the portion of distributions by each operating subsidiary that will be allocated to us, as the owner of 100% of the then-outstanding Class A Units of each operating subsidiary, will be 9.4%, and the portion of distributions by each operating subsidiary that will be allocated to Parent, as the owner of 100% of the then-outstanding Class B Units of each operating subsidiary, will be 90.6%. Parent will not be entitled to any dividends or distributions paid by us unless proportionate dividends or distributions are also paid to the holders of Class A common stock.

Our dividend policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, one or more of the operating subsidiaries is unable to make distributions to us as a result of its operating results, cash requirements and financial condition, the applicable laws of the State of Delaware (which may limit the amount of funds available for distribution), its compliance with any covenants and financial ratios related to any indebtedness it may incur and its other agreements with third parties. Under Delaware law, we may only pay dividends from legally available surplus or, if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Surplus is defined as the excess of a corporation’s total assets over the sum of its total liabilities plus the amount the corporation has determined to be capital. Under Delaware law, our board of directors can use the fair value of assets and liabilities, rather than book value, in making this determination. To the extent we do not have sufficient cash to pay dividends, we may decide not to pay dividends. By paying cash dividends rather than investing that cash in our future growth, we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations or unanticipated capital expenditures.

We are taxable as a corporation for U.S. federal income tax purposes and therefore holders of our Class A common stock will not be taxed directly on our earnings. Distributions of cash or other property that we pay to our stockholders will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax rules). If the amount of a distribution by us to our stockholders exceeds our current and accumulated earnings and profits, such excess will be treated first as a tax-free return of capital to the extent of a holder’s basis in the Class A common stock and thereafter as capital gain.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization (i) on an actual basis as of March 31, 2013, and (ii) on a pro forma basis as of March 31, 2013 after giving effect to the reorganization transactions and this offering.

You should read the following table in conjunction with our financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Unaudited Pro Forma Combined Consolidated Financial Statements” appearing elsewhere in this prospectus.

         
  As of March 31, 2013
(in thousands, except per share amounts)   Actual
Combined Operating Subsidiaries
  Actual
RCS Capital Corporation
  Reorganization Adjustments   Offering Adjustments   RCS Capital Corporation Pro Forma
As Adjusted
Cash and cash equivalents   $ 43,749     $     $     $ 45,522     $ 89,271  
Stockholders’ equity:
                                            
Common stock, $0.01 par value per share, 1,000 shares authorized, 100 shares issued and outstanding on an actual basis, no shares authorized, issued or outstanding on a pro forma basis                              
Class A common stock, $0.001 par value per share, no shares authorized, issued or outstanding on an actual basis, 100,000,000 shares authorized and 2,500,000 shares issued and outstanding on a pro forma basis                       3       3  
Class B common stock, $0.001 par value per share, no shares authorized, issued or outstanding on an actual basis, 100,000,000 shares authorized and 24,000,000 shares issued and outstanding on a pro forma basis                 24             24  
Additional paid-in capital                          43,709       43,709  
Member's equity     31,824             (31,824 )             
Non-controlling interests                 10,125             10,125  
Total stockholders’ equity   $ 31,824     $     $ (21,675 )    $ 43,712     $ 53,861  
Total capitalization   $ 31,824     $     $ (21,675 )    $ 43,712     $ 53,861  

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DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our Class A common stock immediately after this offering. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the net tangible book value per share attributable to the existing equity holders.

Pro forma net tangible book value represents the amount of total tangible assets less total liabilities, after giving effect to the reorganization transactions, including the issuance of 24,000,000 shares of Class B common stock to Parent. Pro forma net tangible book value per share represents pro forma net tangible book value divided by the number of shares of Class A common stock outstanding after giving effect to the reorganization transactions and assuming that Parent exchanged all its Operating Subsidiaries Units for shares of our Class A common stock on a one-for-one basis (with a cancellation of its corresponding shares of our Class B common stock), without consideration for tax benefits from the resulting increase in tax basis.

After giving effect to the sale of 2,500,000 shares of Class A common stock that we are offering at the initial public offering price of $20.00 per share, the deduction of underwriting discounts and estimated offering expenses payable by us and the use of the estimated net proceeds as described under “Use of Proceeds” and assuming the full exchange of Operating Subsidiaries Units (and corresponding cancellation of all shares of our Class B common stock), as described above, our pro forma net tangible book value at March 31, 2013 would have been $53.9 million, or $2.03 per share of Class A common stock.

The following table illustrates the immediate increase in pro forma net tangible book value of $1.61 per share for existing equity holders and the immediate dilution of $17.97 per share to new stockholders purchasing Class A common stock in this offering, assuming the underwriters do not exercise their option to purchase additional shares.

   
Initial public offering price per share            $ 20.00  
Pro forma net tangible book value per share as of March 31, 2013   $ 0.42           
Increase in pro forma, as adjusted net tangible book value per share attributable to new investors     1.61           
Pro forma net tangible book value per share after this offering           2.03  
Dilution in pro forma net tangible book value per share to new investors         $ 17.97  

The following table sets forth, on the same pro forma basis, as of March 31, 2013, the number of shares of Class A common stock owned, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by Parent and by the new investors, assuming that Parent exchanged all its Operating Subsidiaries Units for shares of our Class A common stock on a one-for-one basis (with a cancellation of its corresponding shares of our Class B common stock), before deducting estimated underwriting discounts payable by us:

       
  Shares Owned   Total Consideration(1)
(Millions)
  Average
Price per
Share
     Percent   Amount   Percent
Parent     90.6 %    $ 10.1       16.9 %    $ 0.42  
New investors     9.4 %    $ 50.0       83.1 %    $ 20.00  
Total     100.0 %    $ 60.1       100.0 %          

(1) Total consideration paid by Parent has been presented as the pro forma net tangible book value prior to this offering.

If the underwriters exercise their option to purchase additional shares of Class A common stock in full:

the total consideration paid by new investors will be $57.5 million;

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the pro forma percentage of shares of our Class A common stock held by Parent will decrease to approximately 89.3% of the total number of pro forma shares of our Class A common stock outstanding after this offering; and
the pro forma number of shares of our Class A common stock held by new investors will increase to approximately 10.7% of the total pro forma shares of our Class A common stock outstanding after this offering.

If the underwriters exercise their option to purchase additional shares of Class A common stock in full, pro forma net tangible book value would be approximately $2.26 per share, representing an increase to existing equity holders of approximately $1.84 per share, and there would be an immediate dilution of approximately $17.74 per share to new investors.

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UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma combined consolidated financial statements present the combined consolidated statements of operations and financial position of RCS Capital Corporation and the operating subsidiaries, assuming that all the transactions described below had been completed as of: (i) January 1, 2012, with respect to the unaudited pro forma income statements for the year ended December 31, 2012; (ii) January 1, 2013, with respect to the unaudited pro forma combined consolidated income statements for the three months ended March 31, 2013; and (iii) March 31, 2013, with respect to the unaudited pro forma combined consolidated statements of financial condition. The pro forma adjustments are based on available information and upon assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of these transactions.

The pro forma adjustments principally give effect to the following transactions:

the reorganization transactions described in “Our Structure and Reorganization”;
the issuance of 24,000,000 shares of our Class B common stock to Parent; and
the sale of 2,500,000 shares of our Class A common stock in this offering at the initial public offering price of $20.00 per share.

The unaudited pro forma combined consolidated financial information reflects the manner in which we will account for these transactions. Specifically, we will account for the reorganization transactions by which RCS Capital Corporation will gain control of the operating subsidiaries as a transaction between entities under common control pursuant to FASB Accounting Standards Codification Topic 805, Business Combinations. Accordingly, after the reorganization, RCS Capital Corporation will reflect the assets and liabilities of the operating subsidiaries at their carryover basis.

We have not made any pro forma adjustments to account for incentive fees payable under our management agreement or for awards under the OPP, or to our general and administrative expense, or any of our other expense items, relating to reporting, compliance or investor relations costs, or other incremental costs that we may incur as a public company, including costs relating to compliance with Section 404 of Sarbanes-Oxley.

Future exchanges of Operating Subsidiaries Units by Parent for shares of our Class A common stock (and cancellation of its corresponding shares of our Class B common stock) pursuant to the exchange agreement will be recorded at existing carrying value. Those exchanges will generate deferred tax assets and liabilities subject to the tax receivable agreement as discussed in footnote (c) to the Notes to Unaudited Pro Forma Combined Consolidated Statements of Income for the year ended December 31, 2012.

The unaudited pro forma combined consolidated financial information is included for informational purposes only and does not purport to reflect our statement of operations or financial position that would have occurred had we operated as a public company during the periods presented. The unaudited pro forma combined consolidated financial information also does not project the statement of operations or financial position for any future period or date.

Although a presentation of pro forma income statements is required for all periods presented in the audited financial statements when a reorganization of entities under common control is to occur, the pro forma income statements for the years ended December 31, 2011 and 2010 are not presented herein because, except for taxation as a corporation, these pro forma combined consolidated income statements would be substantially the same as the audited income statements of Realty Capital Securities, LLC. Footnote (c) to the Notes to Unaudited Pro Forma Combined Consolidated Statements of Income for the Year Ended December 31, 2012 contains a discussion of pro forma corporate taxation for the years ended December 31, 2012, 2011 and 2010.

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Unaudited Pro Forma Combined Consolidated Statements of Financial Condition
March 31, 2013
(Dollars in thousands)

           
  Combined Operating Subsidiaries   RCS Capital Corporation   Reorganization Adjustments   As Adjusted Before
Offering
  Offering Adjustments   RCS Capital Corporation Pro Forma
Assets
                                                     
Cash   $ 43,749     $     $     $ 43,749     $ 45,522 (f)    $ 89,271  
Receivables:
                                                     
Commission and dealer manager fees     4,718                   4,718             4,718  
Reimbursable expenses     9,566                   9,566             9,566  
Due from parent     757             (17 )      740             740  
Deferred offering costs           902             902       (902 )(g)       
PP&E, net     371                   371             371  
Prepaid expenses and other assets     2,399                   2,399             2,399  
Total assets   $ 61,559     $ 902     $ (17 )    $ 62,444     $ 44,620     $ 107,064  
Liabilities and Stockholders' Equity
                                                     
Accounts payable   $ 530     $ 752     $     $ 1,282     $     $ 1,282  
Accrued expenses     14,260       133             14,393             14,393  
Due to affiliates     541                   541             541  
Due to parent           17       (17 )                   
Payable to broker-dealers     10,610                   10,610             10,610  
Deferred revenue     3,795                   3,795             3,795  
Distributions payable                 19,000 (b)      19,000             19,000  
Income taxes payable                             908 (h)      908  
Management fee payable                 2,675 (c)      2,675             2,675  
Total liabilities     29,736       902       21,658       52,295       908       53,204  
Common stock, $0.01 par value per share, 1,000 shares authorized, 100 shares issued and outstanding on an actual basis, no shares authorized, issued or outstanding on a pro forma basis           (a)      (d)                   
Class A common stock, $0.001 par value per share, no shares authorized, issued or outstanding on an actual basis, 100,000,000 shares authorized and 2,500,000 shares issued and outstanding on a pro forma basis                 (d)            3 (f)      3  
Class B common stock, $0.001 par value per share, no shares authorized, issued or outstanding on an actual basis, 100,000,000 shares authorized and 24,000,000 shares issued and outstanding on a pro forma basis                 24 (d)(e)      24             24  
Additional paid-in capital           (a)      (d)            43,709 (f)(g)      43,709  
Member’s equity     31,824             (31,824 )(b)(e)                   
Non-controlling interest                 10,125 (b)(c)(d)(e)      10,125             10,125  
Total stockholders' equity and member’s equity     31,824             (21,675 )      10,149       43,712       53,861  
Total liabilities, stockholders' equity and member’s equity   $ 61,559     $ 902     $ (17 )    $ 62,444     $ 44,620     $ 107,064  

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Notes to the Unaudited Pro Forma Combined Consolidated Statements of Financial Condition
for March 31, 2013

(a) Represents the initial 100 shares of $0.01 par value common stock issued to Parent for $100.00, but due to rounding, $1.00 of par value and $99.00 of additional paid-in capital do not appear on the Unaudited Pro Forma Combined Consolidated Statements of Financial Condition.
(b) Represents the $19 million of cash distributions paid to Parent in April 2013.
(c) Reflects a management fee payable in the amount of 10% of the aggregate earnings of the operating subsidiaries for the three months ended March 31, 2013.
(d) The reorganization impacts the equity structure of RCS Capital Corporation and as well as the equity structure of the operating subsidiaries. The above adjustments reverse the initial $1.00 aggregate par value common stock and related $99.00 additional paid-in capital and authorize the new Class A common stock and the new Class B common stock. The operating subsidiaries will issue Class A and Class B Units in the reorganization. RCS Capital Corporation will receive all the Class A Units, which have 100% of the voting rights, giving RCS Capital Corporation control over the operating subsidiaries and requiring consolidated financial statements.
(e) Represents the issuance of all shares of Class B common stock to Parent, the reversal of member’s equity and establishment of the non-controlling economic interest in the operating subsidiaries not owned by RCS Capital Corporation (at this point 100% is not owned by RCS Capital Corporation). The member’s equity of the operating subsidiaries will also be changed to Class A Units, which have 100% of the voting rights of the operating subsidiaries and Class B Units, which have no voting rights. All authorized Class B Units will be issued to Parent.
(f) Represents the issuance of 2,500,000 shares of Class A common stock, par value $0.001 per share, at the initial public offering price of $20.00 per share, including: (i) net cash proceeds equal to $50.0 million less underwriter compensation of 7%, or $3.4 million (assumes that 85,887 shares are sold pursuant to the directed share program and not subject to commission), less additional estimated offering costs of $1.1 million; (ii) the par value of the Class A common stock; (iii) the additional paid-in capital representing gross proceeds, less the amount attributable to the aggregate par value; and (iv) the deduction from additional paid-in capital of $3.4 million related to underwriter compensation discount (assumes that 85,887 shares are sold pursuant to the directed share program and not subject to commission) and $2.0 million of expenses related to estimated offering costs, of which $0.9 million was capitalized as of March 31, 2013.
(g) Represents the closeout of $0.9 million of deferred offering costs to equity upon completion of the offering.
(h) Reflects estimated income taxes payable on 9.4% (the economic interest held by RCS Capital Corporation after the offering) of pro forma income of $24.1 million for the three months ended March 31, 2013 at an estimated combined federal, state and local tax rate of 40%.

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Unaudited Pro Forma Combined Consolidated Statements of Income
Three Months Ended March 31, 2013
(Dollars in thousands, except share and per share data)

           
  Combined Operating Subsidiaries   RCS Capital Corporation(a)   Reorganization Adjustments   As Adjusted Before Offering   Offering Adjustments   RCS Capital Corporation Pro Forma
Revenues:
                                                     
Commissions   $ 133,733     $     $     $ 133,733     $     $ 133,733  
Dealer manager fees     77,392                   77,392             77,392  
Investment banking advisory services     3,490                   3,490             3,490  
Transfer agency revenue     579                   579             579  
Services revenue     2,691                   2,691             2,691  
Reimbursable expenses     741                   741             741  
Other     5                   5             5  
Total revenues     218,631                   218,631             218,631  
Expenses:
                                                     
Third-party commissions     133,735                   133,735             133,735  
Third-party reallowance     20,526                   20,526             20,526  
Internal commissions, payroll and benefits     27,771                   27,771             27,771  
Conferences and seminars     5,005                   5,005             5,005  
Travel     1,221                   1,221             1,221  
Marketing and advertising     1,460                      1,460             1,460  
Professional fees     830                   830             830  
Management fees                 2,675 (b)      2,675             2,675  
Other     1,334                   1,334             1,334  
Total expenses     191,883             2,675       194,558             194,558  
Income before taxes     26,747             (2,675 )      24,073             24,073  
Provision for income taxes                             908 (e)      908  
Net income     26,747                (2,675 )      24,073       (908 )      23,165  
Less: net income –  non-controlling interests                 (24,073 )(c)      (24,073 )      2,271 (d)      (21,802 ) 
Net income attributable to RCS Capital Corporation   $ 26,747     $     $ (26,747 )    $     $ 1,363     $ 1,363  
Per share data:
                                                     
Net income per share attributable to RCS Capital Corporation                                                $ 0.55  
Weighted average shares used in basic and diluted net income per share                                                  2,500,000 (f) 

Notes to the Unaudited Pro Forma Combined Consolidated Statements of Income for the Three Months Ended March 31, 2013

(a) RCS Capital Corporation had no material revenues or expenses for the three months ended March 31, 2013.
(b) Reflects management fees incurred in the amount of 10% of the aggregate earnings of the operating subsidiaries (and of any additional subsidiaries that may be formed or potentially acquired after the date of this offering from time to time, as we anticipate will be provided in an amendment to the management agreement at any such time) in accordance with the management agreement.

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Net income before management fee   $ 26,747  
Management fee (10%)     2,675  
Income before taxes   $ 24,073  
(c) Adjustment to reflect the portion of income attributable to non-controlling economic interests not owned by RCS Capital Corporation (which prior to the offering represents 100% of the economic interest).
(d) Reflects a reduction in income attributable to non-controlling interests resulting from the offering. After the offering, RCS Capital Corporation will own a 9.4% economic interest in the operating subsidiaries.
(e) Reflects estimated tax expense on 9.4% (the economic interest held by RCS Capital Corporation after the offering) of pro forma income taxed at an estimated combined U.S. federal, state and local statutory rate of 40%, determined based on where RCS Capital Corporation’s businesses operate.

 
Net income before provision for income taxes   $ 24,073  
Net income attributable to RCS Capital Corporation (9.4%)     2,271  
Pro forma provision for income taxes (40%)     908  
Pro forma net income   $ 1,363  
(f) Reflects the 2,500,000 shares of Class A common stock offered in this offering as outstanding for the entire period and used as the denominator for both basic and diluted net income per share. Shares of Class B common stock have no economic rights, including no rights to dividends, and are therefore excluded from the net income per share computation.

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Unaudited Pro Forma Combined Consolidated Statements of Income
Year Ended December 31, 2012
(Dollars in thousands except share and per share data)

           
  Realty Capital Securities, LLC   RCS Capital Corporation   Reorganization Adjustments   As Adjusted Before Offering   Offering Adjustments   RCS Capital Corporation Pro Forma
Revenues:
                                                     
Commissions   $ 180,481     $              $ 180,481     $     $ 180,481  
Dealer manager fees     104,861                   104,861             104,861  
Investment banking advisory services     925                   925             925  
Reimbursable expenses     1,185                   1,185             1,185  
Other     45                   45             45  
Total revenues     287,497                   287,497             287,497  
Expenses:
                                                     
Third-party commissions     180,510                   180,510             180,510  
Third-party reallowance     26,849                   26,849             26,849  
Internal commissions, payroll and benefits     45,865                   45,865             45,865  
Conferences and seminars     14,938                   14,938             14,938  
Travel     6,235                   6,235             6,235  
Marketing and advertising     2,680                      2,680             2,680  
Professional fees     1,567                   1,567             1,567  
Management fees                 741 (a)      741             741  
Other     1,441                   1,441             1,441  
Total expenses     280,085             741       280,826             280,826  
Income before taxes     7,412             (741 )      6,671             6,671  
Provision for income taxes                                    252 (c)      252  
Net income     7,412                (741 )      6,671       (252 )      6,419  
Less: net income –  non-controlling interests                 (6,671 )(b)      (6,671 )      630 (d)      (6,041 ) 
Net income attributable to RCS Capital Corporation   $ 7,412     $     $ (7,412 )    $     $ 378     $ 378  
Per share data:
                                                     
Net income per share attributable to RCS Capital Corporation                                                $ 0.15  
Weighted average shares used in basic and diluted net income per share                                                  2,500,000 (e) 

Notes to the Unaudited Pro Forma Combined Consolidated Statements of Income
for the Year Ended December 31, 2012

(a) Reflects management fees incurred of 10% of the aggregate earnings of the operating subsidiaries (and of any additional subsidiaries that may be formed or potentially acquired after the date of this offering from time to time, as we anticipate will be provided in an amendment to the management agreement at any such time) in accordance with the management agreement.

 
Net income before management fee   $ 7,412  
Management fee (10%)     741  
Income before taxes   $ 6,671  

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(b) Adjustment to reflect the portion of income attributable to non-controlling economic interests not owned by RCS Capital Corporation (which prior to the offering represents 100% of the economic interest).
(c) Reflects estimated tax expense on 9.4% (the economic interest held by RCS Capital Corporation after the offering) of pro forma income taxed at an estimated combined U.S. federal, state and local statutory rate of 40%, determined based on where RCS Capital Corporation’s businesses operate.

The following pro forma schedule assumes that 9.4% of RCS Capital Corporation’s income would be subject to U.S. federal, state and local income tax.

     
  Year Ended December 31,
     2012   2011   2010
     (in thousands)
Net income (loss) before management fee and provision for income taxes   $ 7,412     $ 3,742     $ (2,382 ) 
Management fee (10%)     741       N/A       N/A  
Net income (loss) before provision for income taxes     6,671       3,742       (2,382 ) 
Net income attributable to RCS Capital Corporation (9.4%)     630       353       (225 ) 
Pro forma provision (benefit) for income taxes (40%)     252       141       (90 ) 
Pro forma net income (loss)   $ 378     $ 212     $ (135 ) 

RCS Capital Corporation will enter into a tax receivable agreement with Parent requiring RCS Capital Corporation to pay to Parent 85% of the amount of reduction, if any, in U.S. federal, state and local income tax liabilities that RCS Capital Corporation realizes (or is deemed to realize upon early termination of the tax receivable agreement or change of control) as a result of the increases in tax basis of its tangible and intangible assets created by Parent’s exchanges of its Operating Subsidiaries Units for shares of Class A common stock (with a cancellation of its corresponding shares of our Class B common stock) pursuant to the RCS Capital Corporation exchange agreement. This will be RCS Capital Corporation’s obligation. There are no deferred tax assets anticipated to result from the initial public offering. If Parent exchanged all its Operating Subsidiaries Units (with a cancellation of its corresponding shares of our Class B common stock) at the initial public offering price of $20.00 per share, the estimated increase in tax basis at March 31, 2013 would provide us with a cash tax benefit of approximately $187.9 million, based on an estimated combined U.S. federal, state and local tax rate of 40% (assuming no changes in the relevant tax law and that we can earn sufficient taxable income to realize the full tax benefits of the increased amortization and depreciation of our assets). Parent would be entitled to receive annual payments equivalent to 85% of the benefit, or a total of approximately $159.7 million over the life of the benefit, which may be as long as 15 years.

(d) Reflects a reduction in income attributable to non-controlling interests resulting from the offering. After the offering, RCS Capital Corporation will own a 9.4% economic interest in the operating subsidiaries.
(e) Reflects the 2,500,000 shares of Class A common stock offered in this offering as outstanding for the entire period and used as the denominator for both basic and diluted net income per share. Shares of Class B common stock have no economic rights, including no rights to dividends, and are therefore excluded from the net income per share computation.

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SELECTED FINANCIAL DATA OF THE OPERATING SUBSIDIARIES

The following selected financial data of the operating subsidiaries should be read in conjunction with, and are qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this prospectus. The selected operating data for the three months ended March 31, 2013 and 2012 and the selected balance sheet data as of March 31, 2013 have been derived from the unaudited combined financial statements of the operating subsidiaries included elsewhere in this prospectus. The summary selected balance sheet data as of March 31, 2012 has been derived from the unaudited financial statements of Realty Capital Securities, LLC, which are not included in this prospectus. The selected operating data for the years ended December 31, 2012, 2011 and 2010 and the selected balance sheet data as of December 31, 2012 and 2011 have been derived from Realty Capital Securities, LLC’s audited financial statements included elsewhere in this prospectus. The selected operating data for the years ended December 31, 2009 and 2008, and the selected balance sheet data as of December 31, 2010, 2009 and 2008, have been derived from audited financial statements of Realty Capital Securities, LLC that are not included in the prospectus. For periods prior to and including December 31, 2012, we provide data solely for Realty Capital Securities, LLC because it was the only one of our operating subsidiaries that was in operation as of and prior to December 31, 2012.

It is important to note that we do not, and after giving effect to this offering will not, own 100% of the membership interests in the operating subsidiaries, including Realty Capital Securities, LLC. Prior to this offering, Parent owned 100% of the membership interests in each of the operating subsidiaries, including Realty Capital Securities, LLC. Immediately prior to the consummation of this offering, 100% of the then-outstanding Class A Units of each operating subsidiary (conferring voting and economic rights) will be issued to us and 100% of the then-outstanding Class B Units of each operating subsidiary (conferring economic, but not voting, rights) will be issued to Parent.

             
             
  Three Months Ended March 31,
(unaudited)
  Year Ended December 31,
(In thousands)   2013   2012   2012   2011   2010   2009