The Securities and Exchange Commission said Raymond James Financial Inc. and Robert W. Baird & Co. will pay $850,000 in penalties for failing to establish procedures needed to determine what their clients were being charged in commissions beyond their wrap-fee programs.
The firms' financial advisers weren't able to determine the magnitude of fees charged to their clients when sub-advisers “traded away” with a broker-dealer outside their wrap fee programs, according to an SEC
statement Thursday. Raymond James agreed to pay a $600,000 penalty and Baird $250,000 to settle the SEC's charges.
Scrutinizing wrap-fees has been an area of focus under the SEC's national exam program. The regulator's investigation found that some clients of Raymond James and Baird were unaware they were being charged beyond the single wrap fee they paid for bundled investment services.
“Costs are a critical factor when firms determine whether a particular investment product or strategy is suitable for a client,” Andrew Ceresney, director of the SEC's enforcement division, said in the statement.
“Baird and Raymond James lacked policies and procedures to consider an entire category of cost information and didn't fully evaluate whether these wrap fee programs were a good fit,” he said.
The firms agreed to the fines without admitting or denying the SEC's charges.
