According to the SEC, "This matter arises from Lockwood's failure to adopt and implement policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder in connection with its assessment, oversight, and disclosure of the trading away practices of the third-party portfolio management firms in its wrap programs. More specifically, as described below, from at least 2008, and continuing on an ongoing basis to the present, Lockwood's policies and procedures failed to require that material information about trading away (i) would be obtained and considered by Lockwood prior to making the third-party portfolio management firms available to clients in its wrap programs and/or (ii) would be disclosed to clients directly or through their third-party registered investment advisers."

The Commission stated that: "As a sponsor of wrap fee programs, Lockwood offers investors a selection of various subadvisers to choose from, which in turn select investments on their behalf. Those subadvisers typically directly trade through the wrap fee program's participating broker-dealer because the cost of execution is included in the annual wrap fee that each client pays to participate in the program. However, if a subadviser trades away by choosing a different broker- dealer to execute a particular trade, the client often incurs additional transaction costs. The SEC's order found that Lockwood failed to adopt and implement policies and procedures requiring it to gather information about subadvisers' trading away and requiring it to disclose that information to wrap fee program clients so that they could make informed investment decisions."