Edward Jones - California Law Suit

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Mar 15, 2006 2:56 pm

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."



Looks like y'all will have to wait some more for those LP Units

Mar 16, 2006 8:45 am

hey where all the kool-aidaholics in supporting their "pusher"?


Let's see they lost the appeal to would have allowed dougie to stay on and now they've lost twice to have the California lawsuit dropped that I recall some kool-aidaholic announce would be dropped, but that was almost two years ago.  Yes, the wheels of justice turn slowly,  unfortunatly they seem to be grinding up on on ej.

Mar 16, 2006 9:37 am

I can hear it now... "We didn't do anything different than anyone else did. They're just picking on us because we are so successful." "We are the most ethical firm on Wall Street." "We treat our clients better than anyone else."  Did I miss anything? No reason now for the chuggers to respond.

Mar 16, 2006 9:38 am

You did miss one thing.


"They are the best darn salesforce in the world"

Mar 16, 2006 5:36 pm

Someone help me understand this lunacy at Edward Jones. I thought under blue skies law the state has the right to seek judgement in this area. Obviously someone at Edward Jones acknowledges this fact or they wouldn't have settled with Maine. So why are they fighting CA on this issue and waisting time in the appellate court instead of getting ready for trial?

Mar 16, 2006 6:37 pm

How do the clones justify settling with Maine but saying Calif has no case beacuse the federal settlement covers the individual states?  They should fire their attny's and have the best salesforce in the world make their case to the courts in California.  Just show the judge an ICA mountian chart and tell him all he needs is a growth and income mutual fund to solve all his problems.   Maybe then the poor IR's could get their long awaited LP. 


Too much uncertainty folks, just too much uncertainty to raise capital right now. Yeah right!

Mar 16, 2006 8:21 pm

How much do you think Bear Stearns will have to pay since their settlement was so much higher than EJs?



Joedog

Mar 17, 2006 1:21 am
advisor1:

Someone help me understand this lunacy at Edward Jones. I thought under blue skies law the state has the right to seek judgement in this area. Obviously someone at Edward Jones acknowledges this fact or they wouldn't have settled with Maine. So why are they fighting CA on this issue and waisting time in the appellate court instead of getting ready for trial?


The reason EDJ does not want to settle with California is pretty simple.  Maine is a small state.  1 in every 7 Americans lives in California.  The settlement with California, if one is ever reached, is going to be one gigantic pile of jack.

Mar 17, 2006 10:00 am

joedog,


Good defense, deflect the issue and bring up another firm.


You really are like children, "sure I pushed Sally down but Billy Stearns punched Bobby so he is a badder boy than me." 

Mar 17, 2006 10:29 am

Typical.  There's no one here defending Bear Stearns...if you don't have anything intelligent to add, go take another swig from the Kool-Aid still.


See Noggin and tjc if you want to figure out how to defend your firm with a little class instead of just sounding like an idiot.

Mar 17, 2006 12:01 pm

Upton Sinclair can sum up the Jones clowns:


"It is difficult to get a man to understand something when his paycheck depends on his not understanding it!"


 



Mar 18, 2006 9:09 am
compliancejerk:

joedog,



Good defense, deflect the issue and bring up another firm.



You really are like children, "sure I pushed Sally down but Billy Stearns punched Bobby so he is a badder boy than me."





Well, JERK. You got me there. That's was my intent, to deflect the issue . Its a logical question with no implied EJ defending. I guess in your simple mind, if you are not against EJ then you must be for it.



If the CA AG is enforcing the law in is state, then, as legal precedent, the Bear fine from CA could be more than 3 times the fine for EJ.



Joedog

Mar 21, 2006 9:11 am

What happen to old Doug "3 Mil" Hill?  I heard he was trying to get back incharge...........He could show CA something..........It's called cash to stay out of jail..........


JoeDog , lighten-up a bit...........we all know EDJ isn't alone, but the other Firms all seem to admit when they get caught they did something wrong. 


Edward Jones never has nor will they ever, that is the difference the arrogance of Drones and Clones we never did anything wrong....................

Mar 21, 2006 4:16 pm

Player, right on, what Edward Jones doesn't yet realize that their arrogance is costing them more than fees to some useless attorney that thinks they can win in the appellate court. Most good companies when faced with this dilemma similar to Jones would capitulate and settle. The true cost of their arrogance is the loss of IR's, closing of offices and keeping non-IR offices open. Eventually, Lance is right it is the capital.

Mar 23, 2006 5:10 am

Hey Drones and Clones,


What are the numbers of IR's at Edward Jones? 


Why have so many left?      


What's with all the vacant offices?


Is it true Doug "3 Mil" Hill wants to come back?


Is it true when a new IR takes over an open office because a vet left, they are allowed by compliance to churn and burn and encouraged to do so?

Mar 23, 2006 9:38 am

Or better yet....just lie about the departed rep and his/her new firm. I heard a good one the other day....rep that took over a departed jones office was telling the clients that if they moved their accts to the new firm, the new firm would "take 2% right off the top" of their accts. I assume the idiot that made that statement was alluding to the fact that the departed's new firm offered mgd. accts. and "you know they charge LOTS of $$ for those". What a bunch of fools/idiots/liars!

Mar 23, 2006 9:53 am

Revealer, fools, probably. idiots, many. liars = complete ignorance. Many simply are so green (not green in reference to production) that they simply do not understand the business. The travesty is they think they do and their answers are just buy g&i mutual funds. During an audit I literally had a field supervision director say I don't know why you are buying all thes different funds when over time a good growth and income fund will get the job done. That was '02' I am guessing those clients who own mid cap, small cap and emerging mkts. are a little happier than just owning a good g&i fund. Ignorance or arrogance not sure but when you have both it can be dangerous.

Mar 28, 2006 1:40 pm

Player, yes it's true New IR's are encouraged by mentors, DL's, TL's, regional leaders and senior vets to "churn & burn" assets taken over in an existing ofc. My RR and I took over an existing ofc in '99 with about $3 mil in assets and were told to "hit the phone and start dialing for dollars" (which was their loose translation for meet all your existing clients, and introduce yourself as their new rep).


Thankfully seven years later, we escaped the Jonestown compound and are living and working INDEPENDANTLY!

Mar 28, 2006 4:01 pm

Revealer that was very believable. I had similiar lies told to my clients when I left.  Thankfully, most of my top clients talked to me to find out what the truth was and they followed me.  Including a 10+ million dollar client that I took from the trust department.  What a low class creepy organization they were to work for.


Good to hear it worked out well in the end for you and your IR Devoted SA.  

Mar 29, 2006 12:05 am
Lance Legstrong:

Upton Sinclair can sum up the Jones clowns:


"It is difficult to get a man to understand something when his paycheck depends on his not understanding it!"


 





From amongst the fray comes a kernel of truth.  This quote is so simple and profound in its truth....describes the nature of the problems for many at EdJones, and for that matter across Wall Street-especially in the major firms-for those who refuse to question aspects of the status quo because it might mean short-term personal sacrifice.