Arete Wealth Management

Arete Wealth Management (CRD #: 44856) is a brokerage firm that has been registered with the Securities and Exchange Commission since 1998. The firm’s headquarters are in Chicago, Illinois, and according to its website, the firm has 100 offices and 262 wealth advisors. The firm also offers over 35 alternative investment products, which are often too risky for ordinary retail investors.

The firm previously did business under the following names:

• Keystone Securities
• Keystone Investment Advisors

Brokerage Services

According to its website, Arete Wealth Management offers full-service broker-dealer, Registered Investment Advisory and insurance services. Depending on what services you use, representatives may execute trades only with your approval or they may use their discretion. Arete’s representatives also provide investment recommendations and research.

Arete offers the following products:

• Domestic and International Equities
• Options
• Structured Products
• Private Funds
• Money Market Funds
• Certificates of Deposit
• Fixed-Income Securities
• Exchange-Traded Funds
• Mutual Funds

Additionally, the firm has some representatives associated with the Masterworks.io brand.

Regulatory Actions

There are three regulatory actions on Arete’s FINRA BrokerCheck Report dating back to 1998. For a complete review of its regulatory actions, see the firm’s detailed BrokerCheck record.

Alleged Failure to Analyze a Private Placement Offering

On July 10, 2012, Arete Wealth Management entered into an Acceptance, Waiver, and Consent agreement (AWC) with FINRA – a type of agreement that allows investors to settle disputes without denying or admitting FINRA’s findings.

The AWC alleged that Arete approved a private offering but failed to perform its due diligence. FINRA alleged that the firm relied too heavily on the representations made by the issuer within the Private Placement Memorandum (PPM). When the firm did eventually perform additional investigative steps, the firm discovered that the law firm and accounting firm supposedly involved with the fund had not actually performed services for the fund.

The Securities and Exchange Commission allegedly determined that the umbrella corporation that owned the fund was involved in fraudulent activity. The SEC seized the fund’s assets as a result.

According to FINRA, in each of the three offerings, the firm’s files did not reveal a critical analysis of the offerings.

As part of the terms of the AWC, the firm consented to a fine of $25,000.

Fees and Conflicts of Interest

Arete Wealth brokers may have a variety of conflicts of interest when they recommend securities. The Customer Relationship Summary (Form CRS) recommends that you ask your financial professional, “How might your conflicts of interest affect me, and how will you address them?”

• The Form CRS discloses that representatives do not have an obligation to update their recommendations.
• Investors pay a commission every time they buy or sell an investment. Brokers therefore have an incentive to encourage their clients to trade more often.
• The firm also has an incentive to encourage you to buy and sell securities that come with higher compensation for the firm. Ask your broker about how they are paid when they recommend a security.
• Custodians may charge account maintenance fees and account inactivity fees.
• In addition to these brokerage firm fees, the firm charges separate fees for advisory services. Make sure you understand how your representative is registered and what types of fees you will pay. Ask about charges associated with mutual funds and structured products.
• Arete is affiliated with Arete Insurance Agency. Arete representatives may earn commissions when their customers purchase Arete insurance products.
• Certain brokers are employed by an affiliate of an investment sponsor and only offer those products. Those products may not necessarily be the best investments for your portfolio.
• Arete brokers receive fees, payments, credits, and reductions in costs from third-party product sponsors.
• Certain funds and sponsors share the revenue they earn from your investments in their products.
• Arete has a financial incentive to recommend the securities for which the firm is a managing broker-dealer.

Arete Brokers and Their Histories of Misconduct

Several recent disputes allege Arete Wealth Management brokers recommended unsuitable investments. Unsuitable investments violate FINRA Rule 2111, which requires brokers to consider their investor’s financial goals, risk tolerance, age, liquidity needs, and tax status, among other investor characteristics.

• In July 2023, an investor sought $100,000 in a suitability dispute with an Arete broker. Another suitability dispute on this broker’s record settled for $150,000.
• Another investor dispute with an Arete broke is seeking six figures.
• Investors are seeking $257,500 in a suitability dispute from February 2023.
• There is yet another suitability dispute with an investor seeking $150,000 from August 2022.

Did You Suffer Losses Following Possible Broker Misconduct?

Investors who are concerned that they may have suffered losses following broker misconduct should contact a securities attorney. Securities attorneys can represent investors who are pursuing FINRA arbitration to recover from investment fraud. Investment contracts typically contain a pre-dispute arbitration clause that requires investors to use FINRA arbitration rather than suing in a civil court.