Thank you, Vicky. On the next slide we have our next examination priority which is wrap fee programs. In cases you're not familiar, wrap fee program is when the advisor charges a single fee for advisory and brokerage services. This topic was not in the 2016 exam priorities, but it's not something new. I can recall and Vicky probably recalls also that wrap fee programs were of interest 10 years ago back when we were at the SEC.

One of the main concerns here is whether or not a wrap fee program is suitable for the client. Often wrap fees have a higher fee than a traditional non-wrap account. If an account is not actively trading, a client may end up paying a higher fee in a wrap program than if the services were paid for separately.

One of the tests you can perform to check wrap fee suitability is calculating portfolio turnover. One obvious thing that can be seen from portfolio turnover is churning or excessive trading in the account. The concerns of wrap fee program you're actually looking for the opposite or low portfolio turnover and something that's sometimes referred to as reverse churning, a sign that the account is not trading frequently and is sitting by in hold investments where a wrap fee program may not be most suitable. I recommend that you periodically review portfolio turnover and document such review.

You also ensure that clients receive accurate disclosure with the respect to a wrap fee program. All clients in a wrap fee have to receive form ADV part 2A appendix one which is also commonly known as a wrap brochure. This is a disclosure statement prepared by the wrap fee program sponsor. In this you want to be sure to disclose that the program may cost the client more or less than purchasing the services separately, and also include any fees that the client may pay in addition to the wrap fee and describe the circumstances under which the client may pay these fees. Clients also need to be provided with the investment advisor's form ADV part 2A if the sponsor is not also the investment advisor.

Another thing with wrap fee programs is you want to make sure that you don't forget to document your periodic reviews of best price and execution. I often hear advisors that recommend the services of only one broker say that they don't think they need to review best price and execution or they're unsure of how to go about it. You do need to be reviewing this and you want to make sure that you're reviewing the services provided by your recommended broker and documenting those reviews and also periodically researching alternatives, reach out to some other brokers and see what kind of services they have and document why or why not you feel they would better serve your clients.  SEC examiners generally will ask you for documentation regarding your review of best price and execution, so you want to be sure you have that.