AR Capital LLC, a major sponsor of non-traded REITs and business development companies, announced Monday that it will cease raising money for new products at the end of the year.

The affected programs include the Business Development Corporation of America II, ARC Healthcare Trust III, New York City REIT II, ARC Hospitality Trust and ARC Global Trust II.

AR Capital, founded by real estate magnate Nicholas Schorsch, blamed regulatory and market uncertainty for the suspension of new sales.

It will continue to manage $19 billion in non-traded investment programs. 

AR Capital also said that it had directed Realty Capital Securities to immediately “discontinue all proxy activities on behalf of all AR Capital sponsored companies, in light of the recent action taken by the state of Massachusetts.”

Massachusetts regulators on Thursday charged that Realty Capital Securities, another Schorsch-founded firm that wholesales and services non-traded investment programs, had fraudulently solicited proxies for Business Development Corp. of America (BDCA), an AR Capital program.

The proxy vote was in connection with the pending purchases of AR Capital and Realty Capital Securities by Apollo Global Management, the investment firm founded by Leon Black.

The state’s complaint said that its investigators believed fraudulent voting was occurring across “multiple” AR Capital investment funds, not just BDCA.

Days prior to the Massachusetts action, Apollo and AR Capital called off the agreement to have Apollo take a majority stake in AR Capital for $378 million. Apollo also cut the price to be paid for Realty Capital Securities to $6 million from $25 million.

A majority of the products sold by Realty Capital Securities are sponsored by AR Capital.

Realty Capital Securities is currently a unit of RCS Capital, the holding company for Cetera's other broker-dealers.

AR Capital said Monday that the suspension of product sales was in reaction to the pending Department of Labor fiduciary rule as well as a new Finra rule that will require per-share estimated values of non-traded products on statements, rather than just the $10 per share purchase price.

Those rules “remain largely opaque in terms of their implications and consequences for the alternative investment industry," said William Kahane, a founding partner of AR Capital, in a statement.

The Finra rule is set to take effect in April.

A final DOL rule is expected in the first half of next year. In its current form, the DOL rule would not allow the sale of non-traded products in IRA accounts.
 
“As the government's position becomes clearer, we may reconsider our present posture on these issues,” Kahane said.

Spokespersons for AR Capital and Apollo were not immediately available for comment Monday.

AR Capital has historically been one of the largest sponsors on non-traded investment programs, but has suffered ever since an accounting scandal erupted last year at another Schorsch-controlled REIT, American Realty Capital Properties, since renamed VEREIT.

In the wake of that scandal, many broker-dealers pulled back on the sale of AR Capital and other Schorsch-affiliated programs.