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  1. #1

    IA Brief: If your program is a “wrap”, be prepared

    An investment adviser’s participation in a wrap fee program will not only increase its compliance and disclosure responsibilities but raise its regulatory profile with heightened focus on the programs. The focus was recently demonstrated with a Securities and Exchange Commission case in which two large firms settled complaints over wrap fee program compliance failures.



  2. #2

    IA Brief: If your program is a “wrap”, be prepared

    Investment advisers are often creating or implementing new programs to meet their clients’ specific needs and ultimately improving their client experience. In recent years, the use of single fee programs or a more holistic approach to the advisory relationship has been embraced; however, programs that bundle particular services can often fall into the definition of a wrap fee program.



  3. #3

    IA Brief: If your program is a “wrap”, be prepared

    A firm that is, or may be thinking about, participating in a wrap fee program must be conscious of the current regulatory environment and some of the increased compliance responsibilities that go along with such a program. A participating firm may have increased disclosure requirements and a need for amplified awareness of suitability for the program.SEC enforcement and focusA recent SEC case charged Raymond James & Associates and Robert W. Baird & Co. with failing to establish policies and procedures necessary to determine the amount of commissions their clients were being charged when sub-advisers traded with broker-dealers outside the wrap fee program. Both firms have subsequently settled with six-figure penalties.According to the SEC, both firms disclosed in brochures that wrap clients could incur additional costs from trades outside the program, but the firms didn’t collect information from sub-advisers about the costs of trading away, or how often they executed trades with other brokers.

  4. #4

    IA Brief: If your program is a “wrap”, be prepared

    Therefore, the lack of trading data left clients unaware of how much they were paying in additional trading away costs, and the clients’ advisers were unable to consider the commission costs when determining whether a particular sub-adviser or the wrap fee program was suitable for their clients, according to the orders.

  5. #5
    content from reference site

  6. #6

    IA Brief: If your program is a “wrap”, be prepared

    Wrap fee programs have also been included in the SEC’s 2016 exam priorities. The SEC will be assessing whether advisers are fulfilling fiduciary and contractual obligations to clients and properly managing such aspects as disclosures, conflicts of interest, best execution, and trading away from the sponsor broker-dealer.

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