News | 05.15.20
SEC Puts Pressure on Fee Transparency in Increasingly Complex Wrap Accounts
As wrap fee accounts grow more complex, they're likely to continue to draw attention from the SEC, experts said after the agency announced Tuesday that it reached a $5 million settlement with Morgan Stanley for giving clients misleading information about its retail wrap fee programs. The brokerage marketed its wrap accounts as providing investment advice, trade execution, and other services for a single fee. But the SEC found Morgan Stanley managers routinely directed wrap fee clients' trades to third-party broker-dealers for execution, which in some instances resulted in the clients paying additional transaction fees that were not transparent. For many years, the SEC included wrap-fee programs among its annual examination priorities. The agency didn't put them on the list this year, but fee transparency is an ongoing theme of agency examinations and enforcement.
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