Wrap Fee Programs In SEC's Crosshairs: Program Participants On Notice

Since 2014, wrap fee programs have been highlighted as an annual exam priority by the SEC's National Exam Program. Over the last three months, those priorities appear to have picked up some tailwind, with the SEC announcing three separate enforcement actions and simultaneous settlements against wrap fee program participants. Two of those actions involved program sponsors—Robert W. Baird & Co., Inc. and Raymond James & Associates, Inc.—while the other action involved a third-party manager to multiple programs—RiverFront Investment Group, LLC.¹ The actions against Baird and Raymond James focused on the adequacy of each sponsor's compliance policies and procedures related to the oversight and disclosure of certain trading practices of third-party managers (or "sub-advisers") on their wrap fee platforms, while the action against RiverFront focused on the sub-adviser's disclosure to investors about its trading practices.