June 11, 1992
TO: INVESTMENT ADVISERS COMMITTEE NO. 24-92
SEC RULES COMMITTEE NO. 40-92
RE: SEC’S RESPONSE TO CHAIRMAN DINGELL’S LETTER ON WRAP FEE
PRODUCTS
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As you may recall, Congressman John Dingell, Chairman of
the House Committee on Energy and Commerce, sent a letter to SEC
Chairman Breeden setting forth several concerns about wrap fee
products. (See Memorandum to Investment Advisers Committee No.
20-92 and SEC Rules Committee No. 27-92, dated May 5, 1992.)
Attached is a copy of Chairman Breeden’s response.
Chairman Breeden responded to Chairman Dingell’s concerns
about the following items concerning wrap fee products: (1) best
execution and adequate disclosure where a client directs the
adviser to use a particular broker-dealer, (2) level of
individualization provided to clients, (3) payment of referral
fees, and (4) registration under the Advisers Act of broker-
dealers and investment advisers participating in these programs.
It is apparent from his letter that Chairman Breeden
believes that the concerns raised by Chairman Dingell are
adequately dealt with under existing regulation of investment
advisers. He also noted that the SEC staff, in its inspections
of wrap fee accounts, has not discovered any problems in
connection with the use of referral fees peculiar to wrap fee
accounts or the registration of persons participating in such
programs.
Amy B.R. Lancellotta
Associate Counsel
Attachment