In SEC v. Arete Wealth Management LLC, a federal judge in the Northern District of Illinois recently refused to dismiss off-channel communications claims in an SEC case accusing the defendants of engaging in securities fraud. [1] Although the court dismissed certain aspects of the SEC’s fraud claims, it rejected arguments that the SEC’s books-and-records rule is unconstitutionally vague or fails to provide fair notice to registrants. Nor was the court persuaded that industry-wide practices or the dissatisfaction with the rule expressed by certain Commissioners should deter its enforcement. As the court put it: “as of now, the rules say what they say.”[2] So where does that leave registrants who remain subject to those rules?

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