Edward Jones to pay $75m in fund case
WASHINGTON -- Brokerage Edward D. Jones & Co. LP agreed to pay $75 million to settle allegations of improper disclosure of revenue-sharing payments it received from a group of mutual fund families it recommended to customers, US regulators said yesterday.
The settlement was disclosed by the US Securities and Exchange Commission, the New York Stock Exchange, and brokerages watchdog NASD. The SEC said the firm settled the case without admitting or denying the allegations. It also agreed to be censured and to cease and desist from future violations.
The disclosure comes only days after the state of California said it sued the firm and criticized the deal with regulators, calling it "inadequate for a national settlement."
The SEC said Edward Jones entered into revenue-sharing arrangements with seven fund groups, which the firm called "Preferred Mutual Fund Families."
But Jones did not tell investors it got tens of millions of dollars from the funds each year, in addition to commissions and other fees, for selling their shares, the SEC said.
"We're pleased to settle these matters so that we can refocus all of our energies and help customers reach their long-term financial goals," said Jones spokeswoman Mary Beth Heying.
On the California suit, Heying said: "We intend to defend ourselves vigorously in that matter."
NASD said it found that Jones held unlawful sales contests every six months. Winning brokers could choose from a list of 35 so-called "world class" vacations in locations such as Singapore, the Caribbean islands of St. Martin and Tortola, and the southwest France resort of Biarritz, with airfare and five-star accommodations.
After the firm changed the rules favoring sales of funds on the Preferred Funds list, some brokers complained that recommending nonpreferred funds and variable annuities hurt their chances of winning a trip, NASD said.
"These kinds of activities increase the potential for investors to be steered into investments that serve the financial interests of the firm and its representatives instead of the best interest of the customers," said Barry Goldsmith, head of NASD enforcement.
NASD said it also found Jones failed to retain e-mails and supervise late trading. 