EDH Hits Calinfornia Snag from WSJ

or Register to post new content in the forum

20 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Mar 15, 2006 2:42 pm

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Edward D. Jones
Hits California Snag


#666; PADDING-TOP: 13px">Judge Tentatively Rejects
Bid to Block State's Lawsuit
Over Funds Sales Practices
By ARDEN DALE
March 15, 2006; Page C13

Edward D. Jones & Co. hit a snag in its campaign to block a lawsuit against it by California Attorney General Bill Lockyer over its mutual-funds sales practices.


Sacramento County Superior Court Judge Loren E. McMaster on Monday tentatively rejected a bid by the broker-dealer to have the securities-fraud suit dropped on the grounds that federal law pre-empts Mr. Lockyer from bringing it.



The judge is expected to issue a final ruling in coming days. If that tentative ruling stands, it will mark the second time Edward D. Jones has lost a fight to have the suit dropped.


At issue is a lawsuit filed by Mr. Lockyer in December 2004 alleging that Edward D. Jones failed to tell investors about "shelf space" payments it received from seven mutual funds to recommend and sell those funds. The suit seeks disgorgement of all profit that Edward D. Jones gained as a result of allegedly violating antifraud provisions of the state's securities laws. It also seeks restitution and damages for investors who bought mutual-fund shares from Edward D. Jones.


Under the agreements at issue in the case, seven mutual funds paid Edward D. Jones either cash or directed-brokerage commission on portfolio transactions to sell those funds, place them on lists of recommended buys or obtain preferential treatment. From January 2000 through December 2004, the broker-dealer extracted about $300 million -- mostly in cash -- in shelf-space payments, according to the complaint. Directed brokerage is the use of trading commissions paid out of a mutual fund's assets to reward brokerage houses for promoting the fund.


The suit is one of two pending that Mr. Lockyer is bringing in the mutual-fund arena that stem from investigations he began in 2004 into funds sales practices.


The other is a related suit against American Funds Inc. It involves allegations that American Funds made payments to the broker-dealer to recommend its products more aggressively.


Edward D. Jones spokeswoman Regina DeLuca-Imral said the company "is exploring our options for an appeal."


The question of whether or not Mr. Lockyer can be pre-empted from bringing the suit is crucial. "However the courts decide that matter will determine whether or not we can proceed," said Tom Dresslar, a spokesman for Mr. Lockyer. "If the long history of jurisprudence is any indication, we will be allowed to enforce California securities-fraud laws against American Funds and Edward Jones."


Thought all you kool aid kids would enjoy this!  I guess this puts those LP units on hold again.




Mar 28, 2006 1:32 pm

I cannot wait to see how Jones tries to worm it's way out of this one.


My RR and I escaped the Jonestown compound October 2005. I can assure you, it's not sour grapes either. We ran Seg IV, profitable, ethical office (yes we BOTH had LP), my RR was on leadership team, we mentored, we volunteered, we recruited, we played ALL the reindeer games your volun-TOLD to play.  It all got to be too, too much, we drank the Kool-Aid and we choked on it. When it came time to think about another LP offering and the cost to "buy-in", my RR asked herself..."do I want to write that check to Jones, or myself this year?" and we haven't looked back since. (and note to all Jonesies -we left NOTHING for the vultures to feed on, our first week of being independant we scalped 85% of our assets.)


It's embarrassing to think about how easily we bought into the whole package for all those years. (recruiting, volunteering, community service, Goodknighting assets from your branch to help some poor newly licensed idiot) At least now we've formed our own company with values, culture and history we really can stand behind!


Oh and yes, to whomever said I can just hear it now..."we didn't do anything that anyone else hasn't already done" that's almost a verbatum response we were given from St. Louis to give to clients.

Mar 28, 2006 7:28 pm

Just wondering. Does Jones "offer" the LP to you or are you "expected" to buy-in the LP?


Mar 28, 2006 9:40 pm
doberman:

Just wondering. Does Jones "offer" the LP to you or are you "expected" to buy-in the LP?


more like "an offer you can't refuse"    

Mar 29, 2006 6:53 am

Has anyone entertained the idea that the partnership might be a pyramid
type arrangement? Has anyone crunched the numbers on this whole
operation? With the trips, the overhead of the individual offices, the
low production levels, the returns to the GP's, the home office support
personnel, etc., I wonder how the rosy financial picture they paint can
actually be maintained. 

Mar 29, 2006 8:05 am

bengal,


unless you are one of the "select" group, you don't get a breakdown of the items you refer to.

Mar 29, 2006 10:17 am

Each Regional Leader get a "report card" that is broken down as follows: 50% is weighted toward "health", the other 50% to "growth".  How much revenue was generated within the region, how much was spent on training costs and administrative support, rents as a percentage of total revenue, and other such meaningful numbers associated with any other business are never, ever, ever talked about.  Period.

Mar 29, 2006 2:53 pm

Bengal - It's totally a pyramind scam. There were many times we'd asked for information re:LP and were told uh...we don't talk about that...we don't give out that information...uh that's for the GPs. 


Soothsayer - The RL's report card is such a joke. At least it was in our region, because we NEVER were "green" we had very few Sr. Vets that were profitable, but tons of New IRs that were sucking terribly. Being on Leadership team, my RR and I always got a copy of the regional report card, and we knew then there would be a 2 hour conference call rife with profanity and blame laid on who needed to be the next person to be fired.


Coincidentally, there was at one time a report sent to the RL's breaking down how much revenue was earned in the region by investment type and sector (i.e. bonds, mf's, insurance etc). He took this report and copied it to the entire Leadership Team and had redlined what area each Leadership member was lacking in and handwrote in some nasty comment about needing to "step it up a notch". Well, one of the bigger vets complained about having HIS numbers shown to other Leadership members and subsequently that report was MIA.


As for money spent on training? That number goes down and down because they are getting more of the Vets out in the region to do more and more of the training, as "volun-TOLD" time. My RR and I now that we're out cannot understand how Jones escapes the Registered Principal rule (series 24)? Within the region there's no immediate supervisor or principal watching over your trades -  only a guy in STL. And with all the training they have us doing, we should have all had 24's. ????

Mar 29, 2006 9:32 pm

I've never understood the lack of Series 24 supervision on an immediate level.  If your supervisor can't just drop in occasionally, exactly what type of supervision are they providing.  How do they know what the broker is saying to clients or what is being mailed out to clients? 

Mar 31, 2006 12:04 am
Lance Legstrong:

<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Edward D. Jones
Hits California Snag


#666; PADDING-TOP: 13px">Judge Tentatively Rejects
Bid to Block State's Lawsuit
Over Funds Sales Practices
By ARDEN DALE
March 15, 2006; Page C13

Edward D. Jones & Co. hit a snag in its campaign to block a lawsuit against it by California Attorney General Bill Lockyer over its mutual-funds sales practices.


Sacramento County Superior Court Judge Loren E. McMaster on Monday tentatively rejected a bid by the broker-dealer to have the securities-fraud suit dropped on the grounds that federal law pre-empts Mr. Lockyer from bringing it.



The judge is expected to issue a final ruling in coming days. If that tentative ruling stands, it will mark the second time Edward D. Jones has lost a fight to have the suit dropped.


At issue is a lawsuit filed by Mr. Lockyer in December 2004 alleging that Edward D. Jones failed to tell investors about "shelf space" payments it received from seven mutual funds to recommend and sell those funds. The suit seeks disgorgement of all profit that Edward D. Jones gained as a result of allegedly violating antifraud provisions of the state's securities laws. It also seeks restitution and damages for investors who bought mutual-fund shares from Edward D. Jones.


Under the agreements at issue in the case, seven mutual funds paid Edward D. Jones either cash or directed-brokerage commission on portfolio transactions to sell those funds, place them on lists of recommended buys or obtain preferential treatment. From January 2000 through December 2004, the broker-dealer extracted about $300 million -- mostly in cash -- in shelf-space payments, according to the complaint. Directed brokerage is the use of trading commissions paid out of a mutual fund's assets to reward brokerage houses for promoting the fund.


The suit is one of two pending that Mr. Lockyer is bringing in the mutual-fund arena that stem from investigations he began in 2004 into funds sales practices.


The other is a related suit against American Funds Inc. It involves allegations that American Funds made payments to the broker-dealer to recommend its products more aggressively.


Edward D. Jones spokeswoman Regina DeLuca-Imral said the company "is exploring our options for an appeal."


The question of whether or not Mr. Lockyer can be pre-empted from bringing the suit is crucial. "However the courts decide that matter will determine whether or not we can proceed," said Tom Dresslar, a spokesman for Mr. Lockyer. "If the long history of jurisprudence is any indication, we will be allowed to enforce California securities-fraud laws against American Funds and Edward Jones."


Thought all you kool aid kids would enjoy this!  I guess this puts those LP units on hold again.


Lance where is your update?????




Mar 31, 2006 10:48 am

The court dismissed the case.

Mar 31, 2006 12:41 pm

That true?  I'm not a fan of Kool-Aid, but it's fun to see someone else eat some crow...


At any rate, I think I'll wait for the official pronouncement...a dismissal is not necessarily the end...

Mar 31, 2006 12:57 pm
Beagle:

I've never understood the lack of Series 24 supervision on an immediate level.  If your supervisor can't just drop in occasionally, exactly what type of supervision are they providing.  How do they know what the broker is saying to clients or what is being mailed out to clients? 


Beagle, Jones has Field Supervision which monitors your every move from St. Louis. It's very much a "big brother" system. FS can see what you are selling, and to whom you are selling it. FS can see what websites you've been to, and what sort of content you are printing. They've even got it down to how many keystrokes on your computer at any given day and time. They can also monitor your outgoing calls (i.e. who you've been calling, how often and how long you talked).


If for some reason you enter a trade that doesn't match suitability or objective for an account, within seconds of transmitting you get what is called an FSPEND, which is a pending message from FS asking you more or less what the hell you are doing? Your answer to FSPENDS, the length of time you wait until you answer, and your reasoning for the trade is all recorded and archived.


FS does one un-announced audit per year, however the minute an FS auditor leaves your office you phone 3 other offices to let them know an auditor is in the area. But that still doesn't erase the fact that series 24 says a supervisor, or anyone doing any training should be within 100 miles of an office.

Apr 4, 2006 12:33 pm

I know they do the Field Supervision stuff from St. Louis but my point is what if the call is made with a cell phone?  What if the broker isn't out making his door to door contacts but is instead sitting in his office talking on the cell phone and making statements that aren't legal by NASD and SEC standards?  How would they ever know?

Getting a completely legal and correct trade done is all well and good but if the broker is making outlandish statements that violate every rule, how is that ever going to be noticed?  Just because they know I called X client on Y date and talked for Z minutes doesn't mean they know what was said, who else was listening and how the sales pitch was conducted.  Plus, they may have complete control over the broker's computer but what about a personal laptop?  A wireless network set up from the office next door?  A cell phone the firm doesn't know about.  It doesn't take a lot to get around EDJ supervision if you know you have virtually no chance of a Supervisor just dropping into the office unannounced.

Apr 4, 2006 6:35 pm
Beagle:

I know they do the Field Supervision stuff from St. Louis but my point is what if the call is made with a cell phone?  What if the broker isn't out making his door to door contacts but is instead sitting in his office talking on the cell phone and making statements that aren't legal by NASD and SEC standards?  How would they ever know?

Getting a completely legal and correct trade done is all well and good but if the broker is making outlandish statements that violate every rule, how is that ever going to be noticed?  Just because they know I called X client on Y date and talked for Z minutes doesn't mean they know what was said, who else was listening and how the sales pitch was conducted.  Plus, they may have complete control over the broker's computer but what about a personal laptop?  A wireless network set up from the office next door?  A cell phone the firm doesn't know about.  It doesn't take a lot to get around EDJ supervision if you know you have virtually no chance of a Supervisor just dropping into the office unannounced.



I'm not here to defend Jones, but everything you are talking about can happen anywhere as well as Jones. No firm listens to phone calls or tracks cell phone or home computer conversations. Come on.


Apr 5, 2006 4:30 pm
Butkus:

The court dismissed the case.


Butkus, correction. The Superior Court of Los Angeles dropped the AMERICAN FUNDS suit. The suit by the CA AG, Lockyer is still VERY much on. The assistant attorney to the AG called my Rep yesterday to ask if she would be willing to tesify. 

Apr 5, 2006 8:18 pm

I have been contacted as well by the AG office.  I declined to be involved.  They have enough information without any input from me. 


In my personal experience it didn't mean doo squat to me that certain mutual fund families were "preferred" and it didn't affect the type of business I did or sway me into offering certain funds over another.  I had already been in the business long enough to be able to do my own research. I used many other funds than just the fabulous 7 and actually mutual funds were a smaller portion of my product mix.  The problem that I saw, however, is that the new IRs who know nothing, were courted by the wholesalers and persuaded to "sell" only their funds.  I make myself unavailable to the wholesalers who, while I know they are trying to make a living, are a pain in the rear and take up my time.   "Just send me the literature, please, I will take a look at it and if I have questions I will call you."

Apr 6, 2006 12:16 am
doberman:

Just wondering. Does Jones "offer" the LP to you or are you "expected" to buy-in the LP?







The LP is offered to those brokers with a "profit" of $20k after all expenses at the branch and a variety of random home office expenses dubbed as "overhead" that goes up with your revenues. Depending on your product mix, you need to be at about $250k / yr to be offered to join (the cult as some ex-ir's might say). It is an investment, comparable to stock (i.e. limited partner) that pays a stated guarantee of 7.5% but has averaged better than 20% annually. Even in the rough years, 01 and 02, it didn't drop below a 14% return. You buy in with a min 25% of principal ($5000 on a 20k offer) they take the returns and pay off the difference. When you have your lp paid for you get checks for the return. There is more to it than I stated, but good bad or ugly that is the gist of the lp. Those brokers with 20 yrs los typically have 200k lp and are earning $40k a year. You can keep it till you die (assuming you don't leave Jones for another firm).

Apr 6, 2006 5:37 am

greenthingy,


As mentioned before reading comprehension at your firm is something to be desired. Please re-read doberman's post and then respond.


If you don't "accept" the "offer" you might as well hand in your termination letter.

Apr 6, 2006 6:57 pm
Incredible Hulk:
doberman:

Just wondering. Does Jones "offer" the LP to you or are you "expected" to buy-in the LP?






The LP is offered to those brokers with a "profit" of $20k after all expenses at the branch and a variety of random home office expenses dubbed as "overhead" that goes up with your revenues. Depending on your product mix, you need to be at about $250k / yr to be offered to join (the cult as some ex-ir's might say). It is an investment, comparable to stock (i.e. limited partner) that pays a stated guarantee of 7.5% but has averaged better than 20% annually. Even in the rough years, 01 and 02, it didn't drop below a 14% return. You buy in with a min 25% of principal ($5000 on a 20k offer) they take the returns and pay off the difference. When you have your lp paid for you get checks for the return. There is more to it than I stated, but good bad or ugly that is the gist of the lp. Those brokers with 20 yrs los typically have 200k lp and are earning $40k a year. You can keep it till you die (assuming you don't leave Jones for another firm).


Do you pay tax on the income of a full 20k investment while the loan is being paid off?


CIB