Arete Wealth Management, a broker-dealer with a focus on alternative investments, over the first three months of the year has paid settlements of more than $1.1 million related to investor claims against the firm, according to a filing at the beginning of the month with the Securities and Exchange Commission.
It's not clear what specific allegations or products prompted Arete Wealth, which is based in Chicago, to settle the investor claims, or "matters," as they are referred to in the filing.
The company also reported an insurance reimbursement of $987,000 related to the matter under its errors and omissions policy, according to the firm's annual audited financial statement, which it filed April 1 with the SEC.
On its website, Arete Wealth reports having 49 offices and 230 financial advisors, and says it works with more than 50 alternative asset managers and sponsors.
A spokesperson for Arete Wealth said the bulk of the $1.1 million the firm has paid in settled claims to investors stemmed from one advisor who had previously been terminated.
Arete Wealth has been in growth mode of late; in 2021, it bought Center Street Securities Inc. of Nashville, Tennessee, with the intention of operating the firm as a separate, stand-alone entity. In November, Center Street said it was closing down.
Center Street's financial advisors were significant sellers of bonds backed by the bankrupt GWG Holdings Inc.
At the end of February, Arete Wealth lost an investor arbitration claim of $75,000, plus interest, to the Knox Family Revocable Living Trust, in the Finra Dispute Resolutions Services arbitration forum. According to the arbitration award, the Knox Trust alleged that an Arete Wealth financial advisor "invested claimant’s money and savings in an outrageously speculative security, GWG L Bonds, which exposed [them] to a complete loss."
"We have a handful of open cases against Arete Wealth, and some involve Center Street, as well," said Bruce Oakes, a plaintiff's attorney who represented the Knox Family Trust in the recent GWG claim.
Over the past decade, about 40 broker-dealers sold close to $1.6 billion of GWG L bonds, which were backed by life settlements, before GWG declared bankruptcy in 2022, leaving the firms that sold the product and their clients in the lurch. It’s not clear what value, if any, the GWG bonds have.
In 2021, Arete Wealth lost a $515,000 arbitration claim involving high-risk private placements managed by GPB Capital Holdings. GPB raised $1.8 billion from investors starting in 2013 through sales of private partnerships, but it has not paid investors steady returns, called distributions, since 2018. The company has since been taken over by a court-appointed receivership but investors waiting for a return of funds have not yet seen any, according to sources.
"GPB is in a real problematic place, and it could take years for investors to get any money back from the receiver," said Adam Gana, a plaintiff's attorney.
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