# ARETE WEALTH MANAGEMENT, LLC X-17A-5 (2024-04-01) — Broker-dealer annual report - Company: ARETE WEALTH MANAGEMENT, LLC - Form: X-17A-5 - Filed: 2024-04-01 - Period: 2023-12-31 - Accession: 0001056689-24-000001 - CIK: 1056689 - File #: 8-50854 - Type: Broker-dealer - Material weakness: No - Auditor: Marcum, LLP - Auditor location: Deerfield, IL - Contact: Heidi Flanagan - Phone: 312-940-3684 - Email: david.hock@aretewealth.oom - Website: aretewealth.oom - Signed by: David Hock (CFO) Original filing: https://www.sec.gov/Archives/edgar/data/1056689/000105668924000001/edgar23s.pdf --- {0}------------------------------------------------ ARETE **WEAL** TH **MANAGEMENT** LLC DECEMBER 31, 2023 {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** # **ANNUAL REPORTS FORM X-17A-S PART** Ill | 0MB APPROVAL | | |--------------------------|--| | 0MB Number. 3235-0123 | | | Expires: Oct. 31, 2023 | | | Estimated average burden | | | hours per response: 12 | | SEC FILE NUMBER **FACING PAGE** **Information Required Pursuant to Rules 17a-5, 17a-12, and lSa-7 under the Securit.ies Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING **O 1/01/2023** MM/DD/YY MM/DD/YY **A. REGISTRANT IDENTIFICATION** | | | | NAME oF FIRM: Arete Wealth Management, LLC | | |--|--|--|--------------------------------------------|--| |--|--|--|--------------------------------------------|--| TYPE OF REGISTRANT (check all applicable boxes): [!] Broker-dealer □ Security-based swap dealer D Checlc here if respondent is also an OTC derivatives dealer D Major security-based swap participant AND ENDING **12/31/2023** ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) | 1115 W Fulton Market, 3rd Floor | | | | | | | | | | |---------------------------------|--|--|--|--|--|--|--|--|--| |---------------------------------|--|--|--|--|--|--|--|--|--| | | | (No. and Street) | | | |------------------------------------------------------------------------------------------|--|------------------------------------------------------------|-----------------|----------------------------| | Chicago | | IL | | 60607 | | (City) | | (State) | | (Zip Code) | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | David C Hock | | 312-940-3684 | | David.Hock@Aretewealth.oom | | (Name) | | (Area Code - Telephone Number) | (Email Address) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing*
Marcum, LLP | | | | | | | | (Name - if individual, state last, first, and middle name) | | | | Nine Parkway North, Suite 200 Deerfield | | | IL | 60015 | | (Address) | | (City) | (State) | (Zip Code) | | | | | 688 | | | | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | • Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and cl rcumstances relied on as the basis of the exemption. See 17 CFR 240.17a-S(e)(l)(ii), if applicable. **Persons who are to respond to the collection of Information contained in this form are not required to respond unless the form displays a currently valid 0MB control number.** {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, Joshua Rogers | swear (or affirm) that, to the best of my knowledge and belief, the | |-------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------| | financial report pertaining to the firm of Arete Wealth Management. LLC | as of | | 2~
12/31 | is true and correct. I further swear (or affirm) that neither the company nor any | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely | | as that of a customer. | | ![](_page_2_Picture_2.jpeg) | Signature:
2---=-- | | |-----------------------|--| | 1itle: | | #### **This filing•• contains (check all applicable boxes):** - iii (a) Statement of financial condition. - iii (b) Notes to consolidated statement of financial condition. - D (c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in § 210.1-02 of Regulation S-X). - D (d) Statement of cash flows. - D (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - D (f) Statement of changes in liabilities subordinated to claims of creditors. - D (g) Notes to consolidated financial statements. - D (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-l , as applicable. - D (i) Computation of tangible net worth under 17 CFR 240.18a-2. - D U) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit **A** to 17 CFR 240.18a-4, as applicable. - D (I) Computation for Determination of PAB Requirements under Exhibit A to § 240.15c3-3. - D (m) Information relating to possession or control requirements for customers under 17 CFR 240.15c3-3. - D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - D (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - iii (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - D (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (t) Independent public accountant's report based on an examination of the statement of financial condition. - D (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR 240.18a-7, or 17 CFR 240.17a-12, as applicable. - D (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - D (y) Report describing any material inadequacies found to **exist** or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). D (z) Other: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ \_ - - ••To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e}{3} or 17 CFR 240.1Ba-7(d}(2}, as opplicable. {3}------------------------------------------------ ### **DECEMBER 31 , 2023** ### CONTENTS | | Page | |--------------------------------------------------------|------| | Report oflndependent Registered Public Accounting Firm | | | Financial statement: | | | Statement of financial condition | 2 | | Notes to statement of financial condition | 3-6 | {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** To the Board of Directors and Member of **Arete Wealth Management LLC** #### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of Arete Wealth Management LLC (the "Company") as of December 31 , 2023 and the related notes ( collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2023 in confonnity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statement based on our audit. We are a public accounting finn registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perfonn, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included perfonning procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and perfonning procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. We have served as the Company's auditor since 2019. Deerfield, IL March 28, 2024 {5}------------------------------------------------ #### **STATEMENT OF FINANCIAL CONDITION** | December 31
, 2023 | | |-------------------------------------|-----------------| | ASSETS | | | Cash and restricted cash | \$
2,038,884 | | Commissions receivable | 1,542,967 | | Insurance receivable | 987,166 | | Prepaid expenses | 399,562 | | Total assets | \$
4,968,579 | | LIABILITY AND MEMBER'S EQUITY | | | Liabilities: | | | Accounts payable | \$
278,230 | | Commissions payable | 1,432,345 | | Settlement payable | 1,124,
166 | | Total liabilities | 2 834,741 | | Member's equity | 2,
133,838 | | Total liability and member's equity | \$
4,968,579 | *The accompanying notes are an integral part of this.financial statement.* {6}------------------------------------------------ #### **NOTES TO ST A TEMENT OF FINANCIAL CONDITION** # **1. Organization and summary of significant accounting policies** ### **Organization:** Arete Wealth Management LLC (the "Company") is a registered securities broker-dealer with the Securities and Exchange Commission (SEC) and is a member of the Financial Industry Regulatory Authority (F[NRA). The Company was formerly registered with the Commodity Futures Trading Commission and was a member of the National Futures Association as an Introducing Broker, it withdrew effective May 24, 2023. The Company, an lllinois limited liability corporation, was organized and began operations on January 20, 1998, and its operational life is perpetual. As a limited liability company, each member's liability is limited to the capital invested. The Company is headquartered in Chicago, Illinois. The Company is a wholly-owned subsidiary of Arete Wealth, Inc. (the "parent company"), a Delaware holding company specializing in financial service company management. ### **Use of estimates:** The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. #### **Cash and restricted cash:** ln accordance with the clearing agreement, all of the Company's property held by the clearing brokers including, but not limited to, securities, deposits, monies and receivables, are used as collateral to secure the Company's liabilities and obligations to the clearing brokers. As of December 3 1, 2023, the Company has a total of \$925,000 on deposit which is reflected as restricted cash in the statement of financial condition. ### **Concentration of risk:** In addition to cash at the clearing brokers, the Company maintains its cash in bank accounts which, at times, may exceed federally-insured limits. The Company has uninsured balances of approximately \$864,000 at December 31, 2023. Management believes that the Company is not exposed to any significant credit risk on cash. #### **Commissions receivable:** Commissions receivable represents the net amount relating to commissions/trading income less clearing costs from the clearing organization. The Company considers commissions receivable to be fully collectible; accordingly, no allowance for credit losses is required. {7}------------------------------------------------ ### **NOTES TO STATEMENT OF FINANCIAL CONDITION (CONTINUED)** # **1. Organization and summary of significant accounting policies (continued)** ### **Income taxes:** The Company is a limited liability company and is taxed as a partnership under the provisions of the Internal Revenue Code. Under these provisions, the Company is not required to pay federal income tax on its income. Instead, the member of the Company is liable for federal and state income taxes on its taxable income, if any. As discussed in Note 1, the Company is a wholly-owned subsidiary of Arete Wealth, Inc., and thus, is a disregarded entity for income tax purposes. #### **Financial Instruments - Credit Losses:** The Company accounts for estimated credit losses on financial assets measured at an amortized cost basis and certain off-balance sheet credit exposures in accordance with F ASB ASC 326-20, *Financial instruments* - *Credit Losses.* F ASB ASC 326-20 requires the Company to estimate expected credit losses over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. The Company records the estimate of expected credit losses as an allowance for credit losses. The Company estimates expected credit losses on receivables over the life of the financial assets as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. ## **2. Clearing agreement** The Company typically maintains, as collateral against losses due to potential nonperformance by its customers, deposits to cover its inventory and outstanding customer positions. The Company's clearing agreement expired on December 4, 2017, but continues on due to a provision that stated that if there was no written notification provided to the Company at the conclusion of the renewal term, the contract will remain in effect until either party provides 90 days written notification of the termination of the contract, or a new clearing agreement is agreed upon. {8}------------------------------------------------ #### **NOTES TO ST A TEMENT OF FINANCIAL CONDITION (CONTINUED)** # **3. Net capital requirements** The Company is subject to the SEC Uniform Net Capital Rule (Rule l 5c3-l ), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to regulatory net capital, both as defined, shall not exceed a 15 to I ratio. At December 31, 2023, the Company had regulatory net capital of \$1,659,912, which was \$1,470,929 in excess of its required net capital of \$188,983. At December 31 , 2023, the Company's net capital ratio was 1. 71 to I. Withdrawals of capital are subject to certain notification and other provisions of the net capital rule of the SEC and other regulatory bodies. # **4. Counterparty risk** Customer transactions are introduced to and cleared through the Company's clearing broker, Pershing, on a fully disclosed basis. Under the terms of its clearing agreement, the Company is required to guarantee the performance of its customers in meeting contracted obligations. uch transactions may expose the Company to significant off-balance-sheet risk in the event margin requirements are not sufficient to fully cover losses that customers may incur. The Company's trades are settled daily between the clearing organization and the Company. Because of this daily settlement, the amount of the unsettled credit exposures is limited to the amount owed the Company for a very short period of time. ln the event the customer fails to satisfy its obligations, the Company may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer's obligations. The Company does not anticipate nonperformance by customers or counterparties in the above situations. ## **5. Related party transactions** Per the terms of an expense sharing agreement, the parent company pays general expenses related to office space, salaries and insurance and allocates a portion of those expenses to the Company. The Company has errors and omissions insurance through an insurance company who is a related party. {9}------------------------------------------------ #### **NOTES TO STATEMENT OF FINANCIAL CONDITION (CONTINUED)** # **6. Contingencies** The Company is periodically subject to examination of its operations by various regulatory agencies. There are no examinations currently in progress. The Company is a defendant or respondent in various pending and threatened arbitrations, administrative proceedings and lawsuits seeking compensatory damages. One of the lawsuits against the Company is a class-action lawsuit in which the Company is one of 76 broker-dealer defendants asserting an unspecified amount of damages. Claim amounts are infrequently indicative of the actual amounts the Company will be liable for, if any. Many of these claimants also seek, in addition to compensatory damages, punitive or treble damages, and all seek interest, costs and fees. These matters arise in the normal course of business. The Company intends to vigorously defend itself in these actions, but the ultimate outcome of these matters cannot be determined at this time. At December 31 , 2023, the Company has open claims ranging from unspecified damages up to \$1 ,79 million, and approximately \$6.6 million in the aggregate. The Company has accrued \$275,000 for these matters, which is included in accounts payable on the statement of financial condition. Subsequent to December 3 I, 2023, the Company settled certain of these arbitration matters resulting in a settlement payable of \$1, 124,166 which is reflected on the statement of fi nancial condition. In conjunction with this settlement payable, the Company recorded an insurance receivable of \$987,166 for the insurance reimbursement under the Company's E&O policy. Through March 28, 2024, the Company has paid out \$ 1,124, I 66 of this liability and received \$987,166 from this receivable. In addition, subsequent to year end, the Company received notice of one new arbitration claim for \$200,000. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.