Regulatory Outlook | 07.28.21
SEC Warns Advisors About Wrap-Fee Conflicts
The Securities and Exchange Commission (SEC) says investment advisors must improve their oversight if wrap-fee accounts and consider more carefully if they are appropriate for clients. Wrap-fee programs are advertised as a way to provide certainty over costs regardless of how often an advisor adjusts investment strategies or makes trades in an account. However, the SEC has been concerned about issues related to buy-and-hold clients into wrap-fee programs. Examinations of that issue by the SEC found that advisors were not monitoring trading in the accounts well enough. The SEC also found that advisors were not doing enough to determine if the accounts were in the best interest of clients. The SEC did provide best practices that advisors can use to stay compliant when using wrap fee accounts. The SEC said, Provide clear disclosures, when recommending wrap fee programs to clients, about whether certain services or expenses are not included in the wrap fee."
Read the full article on InvestmentNews.