Edward Jones Details Payments by 7 Funds

Reuters

By Chris Sanders

Brokerage firm Edward D. Jones &  Co. disclosed it was paid $82.4 million  from seven mutual fund companies, including  those run by Goldman Sachs Group and American  Funds, to recommend their funds over others.

The disclosure on Thursday was required under  a $75 million settlement  reached in December with the St. Louis brokerage firm,  a leading seller of mutual funds. Regulators  said the company failed to disclose to customers  tens of millions of dollars in "revenue  sharing" payments.

In a posting to its Web site, the company  detailed payments during the first 11 months  of 2004 made by American Funds, Federated  Investors, Goldman Sachs Group Inc., Hartford  Mutual Funds, Lord Abbett & Co., Putnam  Investments, a unit of insurance broker Marsh  & McLennan Cos., and Morgan Stanley subsidiary  Van Kampen Investments.

The December settlement -- reached with the  U.S. Securities and Exchange Commission, the  New York Stock Exchange and brokerage firm watchdog  NASD -- related to payments Edward Jones received  from mutual fund firms, but had not revealed  to investors who had purchased its preferred  slate of funds.

Putnam said it does not comment on client  relationships, but a spokeswoman said the  company provides revenue-sharing disclosure  in its prospectuses -- a point several of  the companies also made.

American Funds' Chuck Freadhoff said the  payments were made to help compensate Edward  Jones for the cost associated with educating  the broker's sales force. The money came from  the revenue of its distribution company, and  not from the funds American Funds manages,  he said.

"Everything we have done certainly met  all the rules and regulations of the SEC and  NASD," Freadhoff said.

For Hartford, Edward Jones has been an important  distributor since it began selling mutual  funds in 1996 and was compensated as one of  its key broker-dealers, a company spokesman  said.

Lord Abbett, Goldman Sachs and Van Kampen  declined to comment and Federated said it  does not discuss its business relationships. 

The NASD and SEC declined  to comment on the Web posting. SEC spokesman  John Nester said investigations of several  funds and brokers for revenue sharing practices  are ongoing.

Edward Jones has defended its practice of  showing customers a list of "preferred  families" of mutual funds from which  to choose, saying on its Web site "you  may be overwhelmed" by the task of selecting  an appropriate fund.

"Edward Jones believes that you are  better served if the firm focuses on a select  group of mutual fund families that offer a  broad spectrum of mutual funds," the  company said.

An Edward Jones representative declined further  comment.

Sales involving the seven mutual fund families  represented about 95 percent of all Edward  Jones fund sales over the past five years. 

California sued Edward Jones in December  over revenue sharing, also known as "shelf-space"  arrangements, and blasted the $75 million  settlement with regulators as inadequate.  (Additional reporting by Herbert Lash)

 
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