Consent Agreement and Order: Commonwealth of Pennsylvania v. Arete Capital Management, Inc. — DOBS — US-PA

FILED
2025 SEPTEMBER 10 AM 10:19
PA DEPARTMENT OF
BANKING AND SECURITIES

COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF BANKING AND SECURITIES

COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF BANKING AND
SECURITIES, BUREAU OF SECURITIES
COMPLIANCE AND EXAMINATIONS
v.
ARETE CAPITAL MANAGEMENT, INC.

Docket No.: 25 0025 (SEC-CAO)

The Commonwealth of Pennsylvania, acting through the Department of Banking and Securities (“Department”), Bureau of Securities Compliance and Examinations (“Bureau”), has conducted an investigation of the business practices of Arete Capital Management, Inc. (“ACM”). Based on the results of its investigation, the Bureau has concluded that ACM has operated in violation of the Pennsylvania Securities Act of 1972, 70 P.S. § 1-101 et. seq. (“1972 Act”). ACM, in lieu of litigation, and without admitting or denying the allegations herein, and intending to be legally bound, hereby agrees to the terms of this Consent Agreement and Order (“Order”).

BACKGROUND

The Department is the Commonwealth of Pennsylvania’s administrative agency authorized and empowered to administer and enforce the 1972 Act.
The Bureau is primarily responsible for administering and enforcing the 1972 Act for the Department.
ACM, CRD #124559, was, at all times material herein, a Pennsylvania corporation with an address at Redacted or at Redacted
Redacted

From in or about March 20, 2003 until present, ACM has been registered pursuant to Section 301(c) of the 1972 Act, 70 P.S. §1-301(c), as an investment adviser.
Regulation 304.012(a)(24), 10 Pa. Code § 304.012(a)(24), requires that every investment adviser registered under the 1972 Act shall make and keep true, accurate and current certain books, ledgers and records, including written procedures relating to the business and continuity plan required under Regulation 304.071.
From in or about January 2019 to December 2023, ACM failed to maintain written procedures relating to the business continuity and succession plan required under Regulation 304.071.

VIOLATION

By engaging in the acts and conduct set forth in paragraphs 3 through 6 above, ACM failed to make and keep true, accurate and current written procedures relating to the business and continuity plan required under Regulation 304.071, which forms a basis to deny, suspend, revoke, or condition the registration of ACM or censure ACM pursuant to Section 305(a)(v) of the 1972 Act, 70 P.S. § 1-305(a)(v), and Regulation 304.012(a)(24), 10 Pa. Code § 304.012(a)(24).

RELIEF

Within ninety (90) days of the Effective Date of this Order, as defined by paragraph 16, ACM shall pay the Department an administrative assessment in the amount of $5,000.00. Payment shall be made by certified check or money order payable to the “Department of Banking and Securities” and shall be mailed or delivered, in person, to the Bureau of Securities Compliance and Examinations located at 17 N. Second Street, Suite 1300, Harrisburg, Pennsylvania 17101.
ACM is ordered to comply with the 1972 Act, and Regulations adopted by the Department, and in particular Regulation 304.012(a)(24), 10 Pa. Code §304.012(a)(24).

Should ACM fail to pay the assessment as set forth in paragraph 8 above, the sanctions set forth elsewhere in the Order shall continue in full force and effect until full payment is made. However, this provision shall not be construed as affording ACM the option of either paying the assessment or being indefinitely subjected to sanctions.
Should ACM fail to comply with any and all provisions of this Order, the Department may impose additional sanctions and costs and seek other appropriate relief subject to ACM’s right to a hearing pursuant to the 1972 Act.

FURTHER PROVISIONS

Consent. ACM hereby knowingly, willingly, voluntarily and irrevocably consents to the entry of this Order pursuant to the Bureau’s authority under the 1972 Act and agrees that it understands all of the terms and conditions contained herein. ACM, by voluntarily entering into this Order, waives any right to a hearing or appeal concerning the terms, conditions and/or penalties set forth in this Order.
Entire Agreement. This Order contains the entire agreement between the Department and ACM. There are no other terms, obligations, covenants, representations, statements, conditions, or otherwise, of any kind whatsoever concerning this Order. This Order may be amended in writing by mutual agreement by the Department and ACM.
Binding Nature. The Department and ACM, and all officers, owners, directors, employees, heirs and assigns of ACM intend to be and are legally bound by the terms of this Order.
Counsel. This Order is entered into by the parties upon full opportunity for legal advice from legal counsel.
Effectiveness. ACM hereby stipulates and agrees that the Order shall become effective on the date the Bureau executes the Order (“Effective Date”).

Other Enforcement Action.

(a) The Department reserves all of its rights, duties, and authority to enforce all statutes, rules and regulations under its jurisdiction against ACM in the future regarding all matters not resolved by this Order, except that the Department will not institute a proceeding against ACM under Section 305(a) of the 1972 Act, 70 P.S. § 1-305(a), on the basis of any information obtained by the Department from the investigation by the Bureau of ACM which formed the basis of this Order.

(b) ACM acknowledges and agrees that this Order is only binding upon the Department and not any other local, state or federal agency, department or office regarding matters within this Order.

Authorization. The parties below are authorized to execute this Order and legally bind their respective parties.
Counterparts. This Order may be executed in separate counterparts, by facsimile and by PDF.
Titles. The titles used to identify the paragraphs of this document are for the convenience of reference only and do not control the interpretation of this document.
Finding. The Department finds that it is necessary and appropriate in the public interest and for the protection of investors, and consistent with the purposes fairly intended by the policy and provisions of the 1972 Act to issue this Order.

WHEREFORE, in consideration of the foregoing, including the recital paragraphs, the Commonwealth of Pennsylvania, Department of Banking and Securities, Bureau of Securities Compliance and Examinations and Arete Capital Management, Inc., intending to be legally bound, do hereby execute this Consent Agreement and Order.

FOR THE COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF BANKING AND SECURITIES
BUREAU OF SECURITIES COMPLIANCE AND EXAMINATIONS

Redacted
Eric R. Pistilli
Deputy Secretary for Securities
Date: 09/10/25

FOR ARETE CAPITAL MANAGEMENT, INC.
Redacted
(Signature) John S. Carty
(Print Name) President - Owner
(Title)
Date: 8-27-2025