JONES FINANCIAL COMPANIES LP LLP
10-K filed on 03/31/2006
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Partnership is named, from time to
time, as a defendant in various legal actions, including arbitrations, class
actions and other litigation. Certain of these legal actions include claims
for substantial compensatory and/or punitive damages or claims for
indeterminate amounts of damages. The Partnership is involved, from time to
time, in investigations and proceedings by governmental and self-regulatory
agencies, certain of which may result in adverse judgments, fines or
penalties. In recent years, the number of legal actions and investigations
has increased with a focus on mutual fund issues among many firms in the
financial services industry, including the Partnership.
The Partnership has been named as a defendant in nine civil class action
matters arising out of the Partnership's revenue sharing arrangements and
sales practices associated with Preferred Family mutual funds. In general,
each of these cases allege that the Partnership designated, and recommended
to its customers, seven mutual fund families ("Preferred Families"), in
consideration for the receipt of sales and asset based revenue sharing
payments. Plaintiffs allege that the Partnership was obliged to fully
disclose the nature and extent of its revenue sharing arrangements to
customers and that the Partnership failed to make adequate disclosure.
Although each case is somewhat different, in general, the cases seek
disgorgement of all revenue sharing payments received by the Partnership
from January 1, 1999 through December 2004, which amounts to approximately
$375 million, plus other unspecified damages, attorneys fees and injunctive
relief. The nine civil class actions have been consolidated into the
following three groups of cases.
Spahn IRA, et al. v. Edward D. Jones & Co., L.P., et al. - This case, and
five other companion cases filed in January or February 2004, have been
consolidated under this case caption before the United States District Court
for the Eastern District of Missouri. The Amended and Consolidated Complaint
alleges that the Partnership violated Sections 10(b), 12(2), and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, by failing to
adequately disclose its revenue sharing arrangements to customers.
Plaintiffs seek to represent a class of all persons who purchased shares of
the Preferred Family mutual funds from January 25, 1999 through December
2004. After the Partnership filed a Motion to Dismiss the Amended and
Consolidated Complaint, the Court granted the Plaintiffs leave to file a
Second Amended Complaint which is currently due to be filed on April 15,
2006. No class has been certified in these cases.
Enriquez, et al. v. Edward D. Jones & Co., L.P., et al. - This case was
filed in the Circuit Court for the City of St. Louis, Missouri in January
2004. Plaintiffs allege that the Partnership breached fiduciary duties to
its customers by receiving revenue sharing payments in exchange for the mere
holding of mutual fund shares under management without making a disclosure
to those customers. In addition, Plaintiffs allege that the Partnership was
unjustly enriched by the receipt of revenue sharing associated with those
customers' mutual fund shares held under management. Plaintiffs seek to
represent a class of all Partnership customers who held Preferred Family
mutual fund shares during the period of January 1999 through December 2004.
The Partnership filed a Motion to Dismiss the Petition, which was denied in
January 2005. Although a motion for class certification has been filed, no
class has yet been certified in this case.
and who said the GPs don't have a sense of humor
Would you like to run a tab of the major brokerage firms fines, penalties, extorted money etc. I think Jones would be near the bottom. You must have as selective a memory as your cut and paste on your computer. Directly below that was the dismissal of the california case. Keep crying, I'll keep working.
and how many of those major firm's managing gp (or the equivalent) were forced to step down????