(Bloomberg) -- Brian Kahn is stepping down as chief executive officer of Franchise Group Inc., just months after a leveraged buyout aided by B. Riley Financial Inc., as regulators look into his ties to a defunct hedge fund.

Andy Laurence, FRG’s current executive vice president, replaces Kahn immediately, according to a person familiar with the matter, who asked not to be identified because the decision hasn’t been publicly announced. FRG held a call with lenders to inform them of the change, the person said.

Kahn’s exit has been in the works for some time, the person said, before a report this weekend by Bloomberg that the Securities and Exchange Commission was looking into some of Kahn’s business deals with B. Riley. Kahn has consistently denied wrongdoing and hasn’t been charged with anything. His attorney said in an emailed statement there’s no connection between Kahn’s resignation and any impending action by regulators.

The boutique investment bank, catering to smaller publicly traded firms, helped Kahn finance his buyout of FRG last year, and it holds a stake in the company, which owns retail brands such as Vitamin Shoppe and Sylvan Learning.

No Connection

Bloomberg reported in November that Kahn was regarded by prosecutors as a co-conspirator in a securities fraud case tied to the collapse of Prophecy Asset Management. 

Read More: SEC Probes B. Riley Deals With Client Tied to Failed Fund 

“As previously stated, Mr. Kahn categorically denies any knowledge of wrongdoing perpetrated by the managers of Prophecy, an entity that he stopped dealing with several years ago and which defrauded Mr. Kahn out of tens of millions of dollars,” Douglas Brooks, an attorney for Kahn, said in the emailed statement. “Neither B. Riley nor Franchise Group had any dealings with Prophecy and any suggestion otherwise is patently false.”

The management change will “allow FRG to execute on its longstanding strategic plan and free it from distraction,” Brooks said, adding that Kahn will remain as a consultant to FRG on strategic and merger-and-acquisition matters. “Any suggestion that Mr. Kahn’s resignation is linked to imminent action by the regulators is false, defamatory and is further evidence of the lies that short sellers continue to peddle to profit from their misstatements.” 

Shares of B. Riley fell 4.5% in extended trading at 6:31 p.m. in New York. The company declined to comment on Kahn’s departure. B. Riley said in a statement this weekend it wasn’t aware of an SEC probe but would cooperate with any regulatory inquiry.

“We would welcome an investigation into the outrageous tactics the short sellers have pursued to destroy B. Riley, including the coordinated options trading with zero disclosure obligations,” B. Riley said in its statement. “The short sellers continue to harass, intimidate, and insult employees and everyone associated with B. Riley, resorting to lies and crude remarks so they can personally profit.”

(Updates with comment from Kahn’s lawyer starting in the sixth paragraph.)

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