RIA Compliance Blog
Earlier this year, the SEC Office of Compliance Inspections and Examinations (“OCIE”) sent a letter to registered investment advisers requesting information about their wrap fee programs and how their suitability for clients was determined. Most of the requested information centered around the possible misuse of wrap fee programs by advisers. OCIE examiners will want to see that adequate compliance procedures are in place, and that advisors conduct periodic reviews of their wrap fee programs to ensure that advisers are putting their clients’ interests first.
During an examination, advisers will need to disclose, among other things, the procedures and compliance policies governing their wrap fee programs, each wrap fee program used and its adviser, any brochures or marketing materials used to promote their wrap free programs, and what types of fees are covered in such programs. Advisers will also be asked to provide the SEC with its compliance policies for wrap fee programs. This may include how advisers monitor wrap accounts with high cash balances or accounts with low levels of trading, the oversight procedures of branch offices and representatives outside of those offices, best execution policies, and the initial and ongoing suitability reviews for wrap fee programs.
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