Wrap fee accounts draw new attention from the SEC (FundFire)

With the continued growth of investor assets in wrap fee programs coupled with their increasing complexity, the SEC has put the industry on notice about certain concerns with firms and program sponsors. A recent alert issued by its Division of Examinations highlights several common deficiencies discovered through targeted exams. Amy Lynch, FrontLine’s Founder and President, comments that while the selling point of a wrap fee account is to offer clients one fee for several investment services, today’s programs are sophisticated to a point of requiring more disclosures around conflicts, fees and expenses. Besides these issues, the SEC also cited firms for insufficient monitoring of trading away, where trades are directed to an outside brokerage and a client incurs additional fees. Ms. Lynch added that while there are valid reasons to trade away, it should not be so frequent to cause excessive charges in a client’s account. See FundFire (subscription required), “SEC Puts Wrap Fee Accounts Under the Microscope”