Is it a Wrap? Observations from the SEC’s View on Investment Advisers Treatment of Wrap Fee Programs

The SEC’s recently renamed Division of Examination’s (the “Division”) mandate is to conduct organizational examinations to identify areas of risk, and poorly implemented or ignored compliance programs and policies. It should be noted that its mandate does not include quantifying the cost of that risk.  The Division periodically publishes the results of its examinations in the form of “Risk-Alerts” to both inform the industry and to help improve the industry’s established policies and procedures. In a lengthy examination, the Risk Alert identified wrap fees as a focus area due to the growth in such accounts, and due to the conflict and disclosure practices noted during previous examinations.  Over one hundred advisers managing wrap accounts were examined.  
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