SEC charge against CCO in penny stock scheme raises more questions about gatekeeper liability

A recent complaint by the Securities and Exchange Commission (SEC) against the chief compliance officer of a Chicago-based investment firm contains some of the most worrisome examples of how CCOs can be found liable for misconduct at their firm.

The CCO at Arete Wealth Advisors allegedly “aided and abetted” a fraudulent penny stock scheme by requiring that victims sign agreements containing false information and an illegal liability disclaimer, according to the SEC.

Arete, a registered investment adviser, was charged in a complaint filed Friday in U.S. District Court for the Northern District of Illinois with violating the antifraud and compliance rule provisions of the Investment Advisers Act. Affiliated broker-dealer Arete Wealth Management was charged with violating recordkeeping provisions of the Securities and Exchange Act, according to an SEC press release.