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September 20, 2022 at 01:02 PM
What You Need to Know
- Waddell & Reed agreed to pay disgorgement, interest and a penalty for keeping clients in wrap fee accounts despite infrequent trading.
- The firm's monitoring flagged 737 wrap accounts that should have been converted to brokerage accounts under its policies, the SEC says.
- LPL Financial bought Waddell & Reed’s wealth management business from Macquarie Management for about $300 million last year.
Former RIA/broker-dealer Waddell & Reed agreed to pay a total of nearly $776,000 to settle charges of misconduct over one of its wrap fee programs, the Securities and Exchange Commission said Monday.
According to an SEC order filed Monday, the firm breached its fiduciary duty by failing to take reasonable steps with respect to certain clients participating in the MAPLatitude wrap fee program after Waddell & Reed flagged the client accounts for potential “reverse churning.”
The SEC’s order found that the firm “willfully violated” the antifraud and compliance provisions of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7.
Without admitting to or denying the SEC’s findings, Waddell & Reed agreed to a cease-and-desist order and a censure, and agreed to pay disgorgement of $484,645, prejudgment interest of $90,944, and a civil money penalty of $200,000, the SEC said. The firm also agreed to distribute the funds to harmed clients.
LPL Financial completed a purchase of Waddell & Reed’s wealth management business from Macquarie Management Holdings for about $300 million in April 2021.
