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RCS Capital Corp. (NYSE: RCAP) announced on Monday morning that it will not pursue its plan to purchase Cole Capital from American Realty Capital Properties Inc. (NASDAQ: ARCP) for $700 million. This is probably more of a prudent move by RCS as American Realty is currently under investigation for accounting issues. Investors will be highly disappointed here as the company had previously maintained that it still expected the unit sale to occur.

The firm Bronstein, Gewirtz & Grossman will be conducting this investigation to see if any officers and/or directors have violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Following the news of accounting irregularities, the company announced that Brian Block will be replaced by Michael Sodo as chief financial officer and that Lisa McAlister will be replaced by Gavin Brandon as chief accounting officer. These replacements were effective immediately.

Also, multiple class action lawsuits have been filed against American Realty. For example, Brower Piven, among others, filed on behalf of any investors who had purchased shares of American Realty between May 2013 and October 2014 as a result of the company’s ownership of Cole Real Estate Investment Inc.

The company says that the current year dividend will not be affected by these accounting irregularities, but considering the recent drop in the share price it would make one wonder if future dividends are at risk.

In the past week, shares of American Realty dropped more than 36% to $7.85 on the news of unreliable accounting reports. Monday morning following the announcement, shares of American Realty were trading down almost 13% at $7.70 at the opening bell. The company’s stock has (or maybe “had” as of now) a consensus analyst price target of $12.60 and a 52-week trading range of $7.85 to $14.96. Its market cap is near $7 billion.

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