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Joined: June 01 2005
Posts: 64 Posted: Dec. 10 2005 at 12:11pm | IP Logged It's all about what's best for the client! Edward Jones Mutual Fund Scandal OverviewFrom the mid 1990s until the present, Edward Jones has had selling agreements with upwards of 240 different mutual fund families. Seven (7) of those mutual fund families became known as Edward Jones’s “Preferred Families” of funds. The Preferred Families included American Funds, Federated Investors, Goldman Sachs Funds, Hartford, Lord Abbett, Putnam Funds and Van Kampen Investments.

The mutual funds in the Preferred Families paid extra incentives to Edward Jones in return for Edward Jones soliciting/recommending its clients to purchase these funds. The SEC determined that the incentives were worth tens of millions of dollars each year to Edward Jones, on top of the commissions and other fees Edward Jones received for selling Preferred Families funds. The incentives proved to be powerful motivators, as more than 95% of all Edward Jones mutual fund sales were made in these 7 Preferred Families.

However, this incentive program was not adequately disclosed to the clients of Edward Jones. This left clients of Edward Jones unaware that Edward Jones had a strong motivation to recommend the purchase of the Preferred Families to the exclusion of the other fund families they could recommend, regardless of the client’s best interests.

Federal and State Regulators Take ActionIn December 2004, Edward Jones settled the charges brought by the Securities and Exchange Commission (SEC, press release, Order Instituting Proceedings) and, the National Association of Securities Dealers (NASD, press release, Letter of Acceptance Waiver and Consent), which are the governing bodies of the securities industry, as well as charges brought by the New York Stock Exchange. The charges involved Edward Jones’s failure to disclose to investors the extra incentives it received for recommending certain mutual funds. To settle the charges, Edward Jones paid a total of $75 million dollars.

On the date that this settlement was released, the California Attorney General (press release, Complaint) filed an additional suit against Edward Jones. The California Attorney General stated that he did not believe that the $75 million settlement was sufficient. The California Attorney General also stated that Edward Jones could have accepted up to $300 million in improper payments.

Edward Jones has also entered into a settlement with the securities regulators in its home state of Missouri. In the settlement Edward Jones stipulated and agreed to findings that it failed to adequately disclose the revenue sharing arrangements to Missouri residents and agreed to pay fines totaling $1.5 million. (press release)

What You Can Do

If you have lost money while invested with Edward Jones, please contact us today. We can determine whether Edward Jones violated your rights.

We help people who have suffered losses as the result of investment fraud such as this and will work on your behalf to recover losses that you have sustained.