Investors File Suit Against A.G. Edwards
DOW JONES NEWSWIRES
ST. LOUIS (AP)--A lawsuit filed on behalf of investors accuses brokeragecompany A.G. Edwards & Sons Inc. of taking millions of dollars in "secretkickbacks" over the past five years to push certain mutual funds to clients.
The lawsuit claims that the alleged payments, known as revenue sharing,created a conflict of interest between the St. Louis financial servicesholding company and its customers.
Revenue-sharing fees are legal, but the arrangements must be properlydisclosed.
A.G. Edwards has denied having such a "preferred" list of mutual funds itaggressively promotes to investors, as the lawsuit, which was filed Tuesdayin St. Louis city court, alleges.
The lawsuit, which seeks class-action status, identifies as its leadplaintiffs an Arizona woman and two Pennsylvanians, all with accounts withthe company. It does not specify the amount of the supposed kickbacks.
"The complaint speaks for itself," attorney Jules Brody of Stull, Stull &Brody of New York, one of three law firms representing the plaintiffs, saidWednesday. He declined to elaborate.
An A.G. Edwards spokeswoman said Wednesday the company had not seen thelawsuit and could not discuss it.
A.G. Edwards Inc.'s (AGE) shares fell 54 cents, or 1.3%, to $41.78 inafternoon trading Wednesday on the New York Stock Exchange. The shares havetraded in a 52-week range of $31.09 to $45.70.
In March, the Securities and Exchange Commission fined Citigroup Inc. (C)$20 million and Marsh & McLennan Cos. (MMC) $40 million to resolveallegations that they concealed from customers the fact that brokers werepaid to recommend certain mutual funds, creating a conflict of interest.
In a related move, the National Association of Securities Dealers disclosedthat Citigroup, American Express Financial Advisors Inc. and JPMorgan Chase& Co. (JPM) had agreed to pay a total $21.25 million for alleged violationsin sales of mutual funds.