Written by The White Law Group• April 16, 2024• 6:49 pm• Blog, FINRA SEC Sanctions, Securities Fraud Articles

Arete Wealth Management Complaints and Regulatory Actions

The White Law Group reviews the regulatory history of Arete Wealth Management.

Arete Wealth Management, based in Chicago, Illinois operates through 49 offices with 230 financial advisors, collaborating with over 50 alternative asset managers and sponsors.

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The firm reportedly has four disclosure events on their broker profile, according to FINRA, the self-regulator that oversees brokers and brokerage firms. According to reports, the firm had revenue of $45.2 million in 2020. The firm is dual registered as a brokerage firm and an investment advisory firm, CRD#: 44856/SEC#: 8-50854.

According to their FINRA BrokerCheck profile, the firm has 2 regulatory events, and two arbitrations.

Arete Wealth Management, a broker-dealer specializing in alternative investments, has disclosed settlements totaling more than $1.1 million in the first quarter of 2024 regarding investor claims against the firm, according to an article in Investment News on April 15, 2024. The company also reported receiving $987,000 in insurance reimbursement related to these settlements under its errors and omissions policy.

According to the article, the majority of the settled claims stemmed from one terminated advisor. Arete Wealth recently expanded by acquiring Center Street Securities Inc. in 2021, which later closed in November. Center Street’s financial advisors were notable sellers of bonds backed by GWG Holdings Inc., which declared bankruptcy in 2022, raising concerns about the value of the sold GWG bonds. Arete Wealth faced a $75,000 arbitration loss in February and previously encountered a $515,000 arbitration claim in 2021 regarding high-risk private placements managed by GPB Capital Holdings, which has been under a court-appointed receivership with uncertain timelines for investor reimbursement.

Arete Wealth Management Customer Complaints

The White Law Group has also filed claims on behalf of investors against Arete Wealth Management in connection with GWG L Bonds.

In June 2022, the White Law Group submitted a claim to FINRA Dispute Resolution on behalf of a California family, alleging claims for violation of common law fraud, breach of fiduciary duty, negligence, and negligent supervision. The claim alleged that Arete Wealth Management unsuitably invested its clients in the high-risk GWG Series L Bond, securities sponsored by GWG Holdings, a Dallas-based financial services firm. GWG Holdings, Inc filed for Chapter 11 bankruptcy protection on April 20, 2022 after failing to make $13.6 million in interest payments to bondholders in January. The claim further alleges investment losses in Healthcare Trust Inc and Franklin BSP Lending Corp. (formerly known as BDCA).

The claim was seeking damages of $100,000.01 to $200,000.00.

Last October the White Law Group filed a second claim against Arete Wealth Management involving GWG L Bonds. The claim was seeking damages of $50,000.01 to $100,000.00.

Arete Complaints involving GPB Capital

In February 2021, Arete Wealth Management lost a $515,000 arbitration claim for losses involving high-risk private placements managed by GPB Capital Holdings.

GPB Capital raised $1.8 billion from investors starting in 2013 through sales of private placement offerings, but it has not paid investors steady returns, called distributions, since 2018. The company which invested in auto dealerships and trash hauling businesses reported significant declines in the values of its funds and was also alleged to be involved in a Ponzi-type scheme.

The claimants alleged that Arete Wealth “recommended and sold shares in a risky, high-commission, illiquid private placement, GPB Automotive Portfolio” and charged Arete with negligence, negligent supervision, breach of fiduciary duty and misrepresentations, among others.

Arete Wealth Management Broker Misconduct

There have been several cases of registered representatives employed by Arete Wealth Management who were allegedly involved in broker misconduct and fraudulent activities.

Arete Broker Jonathan Greenfield Barred with 16 Complaints

FINRA reportedly barred Jonathan Jay Greenfield (CRD #2591266, West Hills, California) from association with any FINRA member in any capacity in 2016. Greenfield’s broker report indicates he has twenty regulatory events during his career including criminal charges alleging wire fraud and 16 customer complaints.

Greenfield allegedly recklessly, and at times intentionally, made material misrepresentations and omissions to customers regarding the features of a company’s renewable secured debentures in connection with their purchases of the debentures.

The findings stated that those material misstatements and omissions concerned material facts for investors, including the actual financial condition of the issuer, the safety of the debentures, and the profitability of the issuer’s business. Greenfield reportedly willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and FINRA Rules 2010 and 2020.

FINRA Sanctions Arete Wealth Management

FINRA reportedly censured and fined Arete Wealth Management $25,000 in 2012 for failing to perform adequate due diligence on a private offering. Although the firm took some investigative steps to review the offering, they relied too heavily on the representations made by the issuer within the private placement memorandum (PPM).

After the fund failed to immediately verify the value of customers’ investments, the firm conducted additional investigative steps and discovered that one individual involved with the fund had misrepresented his educational credentials, and that the law and accounting firms supposedly involved with the fund had not performed services for it.

Further, it came to light that the fund’s owners were allegedly involved in fraudulent activities, according to the Securities and Exchange Commission (SEC). The findings also stated that in addition to the firm’s inadequate due diligence, it failed to sufficiently document its due diligence.

There were reportedly two other offerings that also had issues with lack of due diligence, according to the AWC.

What is FINRA BrokerCheck? Easy way to Check your Broker

FINRA BrokerCheck is a free online tool provided by the Financial Industry Regulatory Authority (FINRA) that allows individuals to research and verify the background and professional history of brokers, brokerage firms, and investment advisors.

By accessing the FINRA BrokerCheck website, users can search for information on registered brokers, including their employment history, education, certifications, and any disciplinary actions or complaints filed against them. BrokerCheck also provides information on the broker’s current and past firms, including any regulatory or legal issues associated with those firms.

BrokerCheck is designed to help investors make informed decisions when choosing a broker or investment advisor. By researching a broker’s history and background, investors can determine whether the broker has a history of regulatory or disciplinary issues, and whether the broker has the qualifications and experience necessary to manage their investments effectively.

FINRA BrokerCheck is a valuable tool for anyone considering working with a broker or investment advisor, as it provides easy access to important information that can help investors make informed decisions about their financial future.

Duty to Supervise

Brokerage firms have a legal and ethical responsibility of the firm to oversee the activities of its employees, including brokers and other registered representatives, to ensure that they are acting in accordance with industry regulations and the best interests of their clients.

This duty to supervise is a requirement under the rules and regulations set forth by the FINRA and the Securities and Exchange Commission (SEC). Brokerage firms are responsible for implementing and enforcing policies and procedures designed to detect and prevent potential violations of these regulations, including the mishandling of client funds, fraudulent or unethical behavior, or other misconduct.

The duty to supervise also requires brokerage firms to monitor the activities of their employees and to promptly investigate any red flags or potential violations that may arise. In cases where violations are discovered, the brokerage firm is required to take appropriate action, which may include disciplining the employee or reporting the violation to regulatory authorities.

When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration.

Hiring a Securities Attorney

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.

With over 30 years of securities law experience, including experience working at FINRA and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions attempt to recover their investment losses.

Although our offices are in Seattle, Washington and Chicago, Illinois, the firm reviews securities fraud cases throughout the country.

If you have concerns regarding investments you purchased through Arete Wealth Management and would like to speak with a securities attorney, please call The White Law Group at 888-637-5510.