SEC Risk Alert on Use of Wrap Fee Accounts by Investment Advisers
On July 21, 2021, the Division of Examinations (the “Division”) of the U.S. Securities and Exchange Commission (“SEC”) released a Risk Alert about its assessment of investment adviser firms associated with wrap fee programs.
The SEC identified multiple areas where the investment advisers examined were deficient in their policies, procedures, and practices related to wrap fee programs, and further noted a range of industry practices that investment advisers might consider adopting to meet their fiduciary duty when recommending and managing wrap fee programs.
The Ontario Securities Commission recently published research findings focused on improving investment advisory client participation in designating a trusted emergency contact (referred to in the report as a “trusted contact person” or “TCP”). Although designating a trusted emergency contact is an important tool for investment advisers to protect a senior or vulnerable client’s investments against financial exploitation or losses due to diminished capacity, many clients decline to do so. This new report aims to help investment advisers and broker dealers utilize behavioral science to encourage its senior and vulnerable clients to name a trusted emergency contact. Despite having an intended audience in Canada, the report highlights a number of useful insights and strategies that can be implemented by investment advisers across the United States. To read the full report, click 
vulnerable adults (such as seniors with diminished capacity) from financial exploitation. Similar to financial exploitation laws adopted by other states, South Carolina’s new law permits state registered investment advisers and broker-dealers to delay disbursements and transactions under specified, limited circumstances for a vulnerable client who is an “eligible adult” as defined by the statute. In addition, a registered investment adviser firm may contact other third parties previously designated by the vulnerable client, such as a trusted emergency contact, regarding the suspected financial exploitation. Firms are also permitted to report suspected financial exploitation to South Carolina’s Adult Protective Services and Securities Division on a voluntary basis. In the event that an investment adviser firm delays a transaction or disbursement, reporting to the specified agencies is mandatory. Click