Edward Jones Reaches $1.5M Settlement
By CHERYL WITTENAUER, Associated Press
ST. LOUIS (AP) -- Brokerage firm Edward D. Jones & Co. LP has agreed to pay $1.5 million to resolve Missouri allegations that it failed to disclose to the public its revenue-sharing arrangements with mutual fund companies.
In addition to the penalties, St. Louis-based Edward Jones agreed to disclose on its Web site information regarding payments it receives as a result of those arrangements.
Late last year, the company settled similar claims with the U.S. Justice Department and Securities and Exchange Commission that it had urged clients to buy certain mutual funds without revealing it received compensation from those funds.
The SEC found the company created a conflict of interest by failing to disclose its revenue-sharing deals with seven "preferred" mutual fund groups. The SEC was to distribute Jones' $75 million settlement to the brokerage firm's customers.
Revenue-sharing fees are legal, but the arrangements must be disclosed to investors.
In a written statement Monday, Edward Jones said it was pleased to negotiate a settlement with the Missouri commissioner of securities and that most of the payment would go toward investor education.
The statement went on to say that the December settlement was comprehensive, addressed all concerns, and that the firm's resulting actions "provide adequate disclosure to our clients."
By statute, a portion of Edward Jones' $1.5 million penalty also will go to Missouri public schools.
Under revenue sharing, mutual fund companies agree to pay additional compensation to brokerage firms to recommend their funds. Missouri Secretary of State Robin Carnahan said state securities law requires brokerage firms to tell investors about any incentives they receive from preferred funds.
In January, Edward Jones reported online that it had received $82.4 million in payments last year from seven preferred fund families - American, Putnam, Van Kampen, Lord Abbett, Hartford, Goldman Sachs and Federated.
More than 95 percent of Edward Jones' sales of mutual-fund shares historically have involved sales of those seven, the SEC has said.
Last year's settlement agreement called for a "reconstituted" Edward Jones executive committee.
The company has acknowledged it sometimes encouraged brokers to push certain mutual funds to customers.