Without the information, the firms’ financial advisors were unable to provide the costs or consider the commissions when determining whether the sub-advisors or the wrap fee programs were suitable for clients.
Baird and Raymond James also left clients unaware that they were paying costs beyond the single wrap fee they paid for bundled investment services, the SEC alleges. Both firms were charged with violating sections of the Investment Advisers Act.
Ahead of the settlement, Raymond James has agreed to start a website disclosing the trading away practices of sub-advisors, to identify transactions that were traded away on clients’ account statements, to ensure that its advisors receive information about trade-away practices, to review and update its trade-away policies and procedures and to create an annual report for clients showing the aggregate amount of commissions embedded in trades executed away.
Baird has also agreed to add a footnote on client statements for wrap accounts managed by sub-advisors informing them of commissions embedded within the price of trades away; to distribute at least annually a report that shows commissions embedded in trades away; to regularly review its policies and procedures regarding disclosures, reports and sub-advisors; and to train its financial advisors to understand and analyze sub-advisors’ trading away practices.
Baird and Raymond James settled without admitting or denying the charges against them.