NASAA Series 63Regulation of Investment Advisers and IARsMedium
An investment adviser sponsors a program in which clients pay a single, bundled fee covering both investment advisory services and trade execution costs, regardless of the number of transactions executed in the account. This type of arrangement is known as a:
- Ade minimis exemption
- Bsolicitor arrangement
- Cperformance-based fee arrangement
- Dwrap fee program
Show answer & explanationAnswer & explanation
Correct answer: D. wrap fee program
A wrap fee program bundles advisory and brokerage/execution services into a single fee, typically based on a percentage of assets under management, rather than charging separately for each trade.
Why the other options are wrong
- A. De minimis exemptions relate to registration thresholds, not fee structures.
- B. A solicitor arrangement involves referral compensation, not bundled fees.
- C. Performance-based fees are tied to investment gains, not bundled service costs.
Wrap Fee Program
An advisory program in which a single fee covers both investment advisory services and brokerage execution costs.
- Requires special disclosure (e.g., wrap fee brochure)
- Fee is typically asset-based rather than per-transaction
- Distinct from performance-based or solicitor fee structures
Memory trick: Wrap it up — one fee covers it all