Edward D. Jones & Co., L.P., is a privately held, St. Louis based brokerage firm with nearly 9,000 offices (the most in the industry), primarily in the U.S., but also in Canada and the United Kingdom. The firm’s business model is to have small offices in smaller communities and suburbs, mostly servicing accounts for individual investors and small businesses. It claims to have 7 million customers.
Edward D. Jones Sr. founded the firm in St. Louis in 1922, later merging it with Whittaker and Co., which was founded in 1871. Edward D. “Ted” Jones, Jr. opened other offices, including one in Pueblo, Colorado, connected by a teletype line. When Ed Sr. learned the costs he insisted the office be shut, but Ted persuaded Dad to instead open one-broker offices on either side of the teletype line to Colorado. Thus, the Edward Jones business model was born.
The vast majority of the Edward Jones’ branch offices have one or two “Financial Advisors” (licensed brokers) and one non-licensed office person, sometimes a spouse. The firm pays its brokers a higher percent of commissions than do larger firms. The office arrangement also gives them greater autonomy to pursue their business, but because a licensed supervisor is rarely on premise, it can also lead to supervisory lapses.
Our law firm represents institutional and individual investors nationwide with significant losses in their portfolios, retirement plans or investment accounts. Our attorneys and staff have more than 100 years of combined experience in the securities industry and in securities law. Several of our lawyers served for years as Vice President or Compliance Officer of brokerage firms.
Each lawyer and staff member of our firm is devoted to assisting investors to recover losses caused by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent. We have handled over a thousand cases against hundreds of large and small investment firms, including claims against Edward Jones & Company (f/k/a Edward D. Jones & Company).
Call us at (800)259-9010 or contact us through our website to arrange a free confidential consultation with an attorney to discuss your experiences with an investment advisor or financial firm which resulted in losses.
The Securities and Exchange Commission, NASD and the NYSE fined Edward D. Jones & Co. $75 million for allegations of failures to supervise, maintain records and to adequately disclose revenue sharing payments that it received from a select group of mutual fund families it and its representatives recommended to its customers.
The firm was was also censured and required to disclose on its Web site information regarding revenue sharing payments and hire an independent consultant to review and make recommendations about the adequacy of Edward Jones’ disclosures.
According to an Order previously issued by the SEC, Edward Jones entered into revenue sharing arrangements with seven mutual fund families, which Edward Jones designated as “Preferred Mutual Fund Families.” The public and clients were told it promoted these funds because of long-term investment objectives and performance. But the company failed to disclose it received tens of millions of dollars from the funds each year, in addition to commissions for selling the funds
Edward Jones reportedly provided the Preferred Families with exclusive “shelf space” to market their funds and exclusive access to Edward Jones’ representatives and customer base and exclusively promoted college savings plans offered by these fund families.
SEC Officials said: “When customers purchase mutual funds, they should be told about the full nature and extent of any conflict of interest that may affect the transaction. Edward Jones failed to do that. By not telling investors the whole story, Edward Jones violated the federal securities laws.”
The NASD also charged Edward Jones with holding unlawful sales contests promoting the Preferred Funds. Winning brokers could choose a trip from 35 “world class” vacation destinations. The contests rewarded airfare, five-star accommodations and activities including skiing, golfing, fine dining and tours.
The NASD also found the firm failed to retain emails, failed to supervise the late trading of mutual funds and failed to supervise the activities relating to the Preferred Funds and revenue sharing, directed brokerage, and sales contests.
Edward D. Jones & Company was fined $250,000 by the NASD for procedural failures designed to advise investors they were allowed to exchange certain mutual funds without paying sales “loads”. The firm is also required to pay an estimated $25 million to its clients.
The NASD said that during 2002-2004, many mutual fund families offered NAV (net asset value) transfer programs that eliminated front-end mutual fund sales charges for certain customers. Under the transfer program, customers who redeemed fund shares on which they already paid sales charges were permitted to use the proceeds to purchase shares of new mutual funds without paying another sales charge.
Also fined for these violations were RBC Dain Rauscher Inc., $250,000; Royal Alliance Associates Inc., $250,000; and Morgan Stanley DW Inc., $100,000. None of the firms either admitted or denied the charges, but consented to the orders.
Each firm also was ordered to pay thousands of eligible clients who qualified for, but did not receive, the benefit of the transfer programs. Based on estimates provided by each firm, Edward Jones will pay $25 million, RBC Dain Rauscher, $6.8 million; Royal Alliance, $1.6 million; and, Morgan Stanley $10.4 million, all plus interest.