Edward Jones is starting to bleed, Doug Hill announces he will resign as part of SEC agreement...........how many others will be leaving ?

If, you are not a GP  , You had better hit the road, the hand writing is on the wall, and it's sliding down hill (as in Doug Hill)................Fast...

When Jones announced that it was going to payoff on the LP to people that had not paid any money into it, that should have been a wake-up call, no matter how much Kool Aid you had been drinking

You can't get something for nothing .....oh maybe you can at Edward D Jones & Company

the Domino's are starting to fall.................................

Quite certain it will blow over and no, Jones won't end up selling out. 

Doug leaving?  Is that official?  Oh well.  Still won't mean much to the average joe schmoe investor in po-dunk USA who invests with the local guy who he's known since childhood.  I would be terribly surprised if any of this has much of an effect on Edward D. Jones at all.  From what I gather they are pretty over-capitalized anyway and the only ones affected were the GPs.  Most brokers I know of report that they have had almost no calls on it from their clients...more calls from other brokers than anything else. 

Player sounds like a failed Jones broker that now sells annuities from a bank branch. You're not smart enough to be an indy. Jones will survive and come out much stronger.

I am glad to see Hill go.  Not becuase I want to see Jones hurt but believe he was bad for Jones.

In the past couple of years I have not said Jones has done anything smart but how they are handling the internals on this whole things is great.  The GPs are the ones paying for it, as it should be.  And the life blood of Jones are the people that are in-line for LP or have LP.  These are the people that are profitable and are pulling the weight.  Brilliant in paying these people out.  They legally couldn't continue the offering but nothing stopping from paying them.

The only concern I have in this entire fiasco is for the honest men and women of our profession who had accepted the statements from John Bachmann and Doug Hill that theirs was THE honest firm, a lonely beacon of honor among the squalor of wire houses.  How do you think it feels going to work the next morning?

megdawg,

It appears I hit a nerve with you, stop the personal slamming, realize Jones is changed forever, and all your hoping will not change it ! 

The three of you above must be drinking the Kool Aid by the gallon, when the letters go out to the clients of Edward D Jones & Company,

the crap will hit the fan like never before, for the first time you will be on the defensive, and the rest of the Brokers will be sharing the Good News with your clients, not the Home Office.

It was interesting to read frankstrom comments, he is with Jones , and it still defending them.   Listen closely, Jones settled this close to Christmas to reduce the fallout, however California will not fall so easily.   Also, all of us X-Jonsers will pass the word, when clients find out how deceptive Jones was to try and lesson the fallout, it will be even worse, remember Water Gate, the cover-up was worse than the act, Didn't the GP's learn anything from Tricky Dick ?    I contacted 4 old Jones clients today, and informed them of the Good news, the transfer forms are in the mail, I can't wait to talk to more tomorrow...the cover-up is the worst part of it !

What is really amazing to me and it shows how far this once great Firm has fallen, is the rationalization of the three of you that everything is ok.....that speaks louder that anything you have written...doesn't it ?  

The real loosers here are the clients the are loosing faith in our entire system, isn't it ?

[quote=Player]

megdawg,

It appears I hit a nerve with you, stop the personal slamming, realize Jones is changed forever, and all your hoping will not change it ! 

[/quote]

megdawg,

If you are at Jones, then you know how much support you get from the home office where non-preferred funds are concerned.  Practically NOTHING!  The proprietary system that you use every day revolves around those 7 preferred fund families.  Suppose a client is interested in a good emerging markets fund.  Do you have an easy way to research the best funds available?  No, but you can call STL and they can easily look it up on THEIR system.  You are forced to call STL everytime you need anything related to a non-preferred fund, or you can research it on your own.  How many IR's are going to take the time and trouble to look at non-preferred funds?  How many have the time?  Just their systems or lack thereof point to a conflict of interest.

Also, since the company doesn't carry E&O insurance, what would happen if the IR recommended a non-preferred fund that later lost money resulting in a client complaint for compensation?  Would EDJ stand behind the IR and pay up, or would they step back and leave him holding the bag?

BTW- while I was an IR, I got a wire from the home office concerning 529 plans.  Some IR's in my state wanted to sell our state's 529 plan (non-preferred funds) so that the client could get a state income tax break for the contribution.  A wire came through from the home office saying that we could sell our state's plan but would get no support from STL.  We were on our own.

megdawg, you are kidding yourself if you think that EDJ is an innocent victim in all of this.  They have made it very difficult for an IR to sell anything except those preferred funds.

Well, the dust is finally starting to settle. And there is still smoke bellowing out of St Louis. The other day we had a conference call with our region. The main topic, the LP offering, not that we should be discussing anything else.

It is amazing how your life can be spun around so completly in such a short period of time. It makes me very upset to the fact that the GPs were working for their best interest and not my clients. When those letters go out, my clients will be looking to me for answers. I will be the shmuck, not Doug Hill or the other 300 GPs. This is a game of trust, when my clients question my trust, things are not good. My clients will be questionning this trust in January when they all recieve that magical letter.

Enjoy your Christmas Doug and thanks for the memories. Oh and dont let the door hit you on the way out.

Doug was such a prick. 

He had to pay 3 million himself!  That's 6 months pay. 

Edward Jones 's
Top Executive
To Step Down<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

By JOHN HECHINGER and SUSANNE CRAIG
Staff Reporters of THE <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />WALL STREET JOURNAL
December 28, 2004; Page C1

Edward D. Jones & Co.'s top executive plans to give up his post next year in the wake of a settlement with federal regulators over the tens of millions of dollars in undisclosed fees the brokerage firm received from mutual-fund companies to sell their wares.

The stepping aside of Doug Hill, Jones's managing general partner, was disclosed in a Securities and Exchange Commission filing.

The move is a blow to the St. Louis-based firm, which prides itself on its squeaky clean, even folksy reputation. Last week the company agreed to pay $75 million to settle the regulatory allegations from the SEC, the National Association of Securities Dealers and New York Stock Exchange's regulatory division.

That agreement represented the largest regulatory settlement to date from a brokerage firm involving revenue sharing, an industry practice in which mutual funds pay brokerage firms to encourage them to push their product.

Edward D. Jones, which is a private partnership, also disclosed that Mr. Hill personally agreed to pay $3 million -- a "disproportionate share" of the $75 million penalty. Regulators have said the money would be distributed to investors. As a group, the general partners, including Mr. Hill, will pony up $44 million, carrying a far bigger load than the firm's limited partners, who include many brokers working in store offices across the country.

Last week, the U.S. Attorney's office for the Eastern District of Missouri, which had also been investigating Jones's revenue-sharing agreement, disclosed it had agreed not to prosecute the firm if Jones met certain conditions over the next two years, including paying the $75 million penalty and allowing customers to switch funds free of charge.

Yesterday, Jones said the agreement with the Justice Department also triggered Mr. Hill's departure as managing partner.

The filing said Mr. Hill had agreed to "voluntarily retire." The Justice Department agreement, which Jones filed yesterday, calls for a "reconstituted" executive committee.

Mr. Hill, 60 years old, will stay on as managing partner until the end of 2005, and will continue as a partner after that, according to a memo Mr. Hill sent to staff yesterday. "I agreed to this condition to clear the way for a settlement of these issues so all of us can put the dispute behind us and focus on helping our clients meet their long-term financial needs," he wrote.

Mr. Hill was named managing general partner last year and started the job in January. He took over from long-term Jones executive John Bachmann, who is credited with building the firm into a force to be reckoned with. In recent months, as the revenue-sharing scandal gripped the firm, there has been pressure on Mr. Bachmann to return, according to people familiar with the matter. However, the company requires managing general partners step down at age 65, the age Mr. Bachmann retired at, so any hopes of a return may be wishful thinking.

The firm said it plans to set up a succession committee to find a successor for Mr. Hill. Mr. Bachmann didn't return calls for comment yesterday. Mr. Hill declined through a spokeswoman to comment.

Mr. Hill now becomes one of the highest-profile casualties in the mutual-fund scandal, which has ended the careers of a number of senior executives in the fund world. He is the first head of a major Wall Street firm to step aside.

In recent years, Wall Street has been under siege by regulators who have been examining a broad range of conflicts of interests, such as tainted stock research and secret incentives between mutual funds and brokers. Mr. Hill's move shows just how far reaching the probe is. Edward Jones has long held itself out as an alternative to the conflict-ridden firms, and even took out advertisements to that effect.

Jones has nearly 10,000 sales offices nationwide, making it the largest network of brokerage outlets in the U.S. Its revenue-sharing practices were the subject of a page-one Wall Street Journal story in January 2004.

At Edward Jones , brokers were awarded points that they could apply towards stays at posh European and Caribbean resorts for selling customers mutual funds from firms that were making secret payments.

Meanwhile, the SEC filing and the memo to employees also says that two general partners are leaving the firm, human-resources chief Michael Holmes and Darryl Pope, another general partner. These departures aren't related to the regulatory settlement, the firm said. Messrs. Holmes and Pope couldn't be reached to comment.

Write to John Hechinger at [email protected] and Susanne Craig at [email protected]

'Monday, Jones said the agreement with the Justice Department also triggered Mr. Hill’s departure as managing partner.

The filing said Mr. Hill had agreed to "voluntarily retire."

The Justice Department agreement, which Jones filed Monday, calls for a "reconstituted" executive committee. '

Everyone should understand Mr. Hill's use of the word "voluntarily" is capricious at best.  Without the spin, he is volunteering to step down to satisfy as one of the demands by the Justice Department in order that Jones avoids prosecution. 

Today's Scandal......

Regulators Find
Problem Trading
At Edward Jones

By SUSANNE CRAIG and JOHN HECHINGER
Staff Reporters of THE WALL STREET JOURNAL
December 29, 2004; Page C1

In late 2003, St. Louis brokerage house Edward D. Jones & Co. took out advertisements in newspapers across the country, shaking its finger at the "anything goes" approach that led to abuses in the mutual-fund industry. Now, the company has acknowledged to the Justice Department that it failed to disclose mutual-fund sales practices that led to a $75 million penalty from regulators and a shake-up in its executive suite.

In a Securities and Exchange Commission filing late Monday, Jones also disclosed that regulators had found thousands of instances of the firm's improperly allowing mutual-fund trades made after 4 p.m. Eastern time to receive that day's price. The practice, called late trading, is considered one of the more clear-cut and egregious abuses of the mutual-fund scandal because it can allow favored clients to skim profits from long-term investors.

Regulators didn't identify any specific instances of abusive late trading, but said Jones didn't have the proper systems in place to prevent "any unlawful late trading that may have existed." Jones settled these allegations without admitting or denying them.

The firm, which operates the largest network of retail brokerage offices in the U.S., also disclosed in the SEC filing that Doug Hill, its managing general partner, who signed the ad, is stepping down at the end of 2005 in the wake of a settlement with federal regulators over the tens of millions of dollars in undisclosed fees the firm received from mutual-fund companies to push their products.

A spokeswoman for Jones declined to comment on the filing. Yesterday, Mr. Hill's lawyer said that his client, who declined to comment, was committed to restoring the firm's image. He added that Jones never considered what it was doing to be questionable.

Federal regulators say Jones improperly encouraged its brokers to steer customers toward seven "preferred" mutual-fund companies that secretly paid the brokerage house. That practice, common in the industry, is called "revenue sharing." Jones' revenue-sharing practices were the subject of a page-one Wall Street Journal article in January 2004. Historically, 95% to 98% of Jones sales of mutual funds have been from these funds, regulators found.

Regulators believe undisclosed payments may have hurt clients because brokers had an incentive to put them into inferior or inappropriate products just to get the incentives, which included trips, with an average value of $5,000, to destinations such as Davos, Switzerland, and the British Virgin Islands. Some brokers were provided $1,000 cash for one trip billed as a "shopping spree."

The filing by Jones, a private partnership, included a laundry list of other infractions, including findings that the firm failed to preserve e-mails for at least two years as required by regulators. The filing also included the firm's agreement with the U.S. attorney's office for the Eastern District of Missouri, which had been conducting a criminal investigation of Jones and found that the firm gave inaccurate statements to the SEC in response to a so-called Wells notice. Wells notices warn that regulators may file civil charges and give firms a chance to defend themselves. As part of the agreement with the U.S. attorney, Jones acknowledged making inaccurate statements.

The documents didn't spell out those statements, but people familiar with the matter say U.S. Attorney James Martin's office took exception to Jones's vigorous defense of its revenue-sharing agreements in its Wells response. The spokeswoman for Jones declined to comment, as did Mr. Martin.

The U.S. attorney agreed he wouldn't prosecute if Jones meets certain requirements over the next two years, including paying the regulatory penalty and letting customers who own preferred funds switch to other funds free of charge.

In its settlements with the SEC, the National Association of Securities Dealers and the New York Stock Exchange, Jones neither admitted nor denied wrongdoing. Jones still faces a lawsuit by California Attorney General Bill Lockyer, who has called the regulatory settlement inadequate, given what he said were $300 million in undisclosed payments from funds since January 2000. Jones has said it will vigorously defend itself against that suit.

But in its settlement with the Justice Department, Jones acknowledged it sometimes encouraged its brokers to consider revenue sharing in advising investors on which funds to buy, among other admissions. Meanwhile, the NASD and the NYSE said Jones also failed to have policies to prevent customers from sending an order to buy mutual-fund shares after 4 p.m. and receiving a pre-4 p.m. price. Securities rules mandate orders received after 4 p.m. get the next day's price.

Investors who send in orders late but get the earlier price can exploit late, market-moving information, such as a positive announcement after 4 p.m. from a company that is a big holding in a mutual fund. Those investors can buy shares in the fund and sell the next day, reaping a profit that should belong to long-term shareholders. New York state's attorney general, Eliot Spitzer, who brought late trading to light in the fall of 2003, likened it to betting on a horse race after it was over.

Before November 2003, Jones let its brokers call its service department between 4:01 p.m. and 4:45 p.m. Eastern time and request a mutual-fund trade be allocated to that day's price, according to agreements with the NASD and NYSE contained in the new regulatory filing. To do so, brokers had to certify they received the trade from the customer before 4 p.m., the NASD and NYSE said. Jones called such requests "released trades" and let brokers, after the 4 p.m. cutoff, change amounts of trades and the names of funds bought, regulators said.

Between May 2003 and November 2003, Jones identified 8,700 instances where orders were entered, changed or cancelled after 4 p.m., and the execution price was based on that day's closing price, according to the filing.

The findings are a blow to Jones, which for years has managed to avoid any major run-ins with regulators. Jones' network of approximately 10,000 brokers caters primarily to the so-called buy and hold investor, who invests for the long term. It prides itself on its low-key, folksy image. Jones brokers often go door-to-door to recruit new clients. Many brokers hand out roses to their female clients on Valentines Day. "Investors are entitled to transparency," Mr. Hill and former Managing General Partner John Bachmann wrote in 2003 in a letter to the SEC that became the centerpiece of the firm's ad. "They should know what they are paying, and what we, as the broker, are receiving."

Mr. Hill, 60 years old, will step down as managing general partner at the end of 2005 as part of the agreement with the Justice Department and will remain a partner, a memo he sent to staff Monday. Jones also disclosed that Mr. Hill personally agreed to pay $3 million -- a "disproportionate share" of the $75 million penalty. Regulators have said the money would be distributed to investors. As a group, the general partners, including Mr. Hill, will pony up $44 million, carrying a far bigger load than the firm's limited partners, who include many brokers working in store offices across the country.

Deal explains brokerage exec's fate<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

By Jack Naudi

Of the Post-Dispatch

12/28/2004

Tucked in the middle of a nine-page agreement between Edward Jones and U.S. Attorney Jim Martin is language that in part helps explain the departure of Douglas Hill as Jones' top executive.

The Des Peres-based brokerage announced Monday that Hill will give up his position as managing partner on Dec. 31 of next year.

The announcement came less than a week after the Securities and Exchange Commission penalized Jones $75 million for failing to disclose to investors that seven mutual fund companies paid to get on its "preferred" list.

The agreement between Edward Jones and Martin, announced Dec. 20, requires the firm to hire an "independent employee" who'll work to keep it out of trouble.

That person will report to a "reconstituted executive committee," according to the agreement.

Hill is one of six people on the firm's executive committee, which helps set Jones's policies.

Martin and Edward Jones sources say the makeup of the committee has yet to be determined, but Martin said members must be free of conflicts. That excludes Hill, who's tied closely to the mutual fund problems.

On Monday, Edward Jones said two other members of the executive committee - the youngest and the oldest members - will leave the firm on Friday. But Jones said both are leaving for reasons unrelated to the mutual fund problems.

Darryl Pope, one of 275 general partners, is 65, the company's mandatory retirement age for partners.

Michael Holmes, 46, who headed the firm's human-resources department, will "pursue his interests in providing consulting services to not-for-profit institutions," the company said.

Neither man would comment.

The retirements of Holmes and Pope were announced internally at least a month ago, said an Edward Jones spokeswoman.

"There was nothing unusual," said Mary Beth Heying of Edward Jones. "We have partners who retire all the time. ... There is no connection to those (mutual fund) events."

Of more urgency to many investors are other components of Edward Jones' agreement with the <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />U.S. attorney. One allows customers to move from one of the seven preferred mutual fund families to any other fund without paying commissions and fees.

Edward Jones will contact customers in writing about the plan, Heying said. Once customers receive the notice, they'll have 90 days to make the switch.

Heying also said that on Jan. 6, Edward Jones will comply with another sanction imposed by the U.S. attorney and the SEC. On that date, the brokerage will fully disclose its mutual fund arrangements on its Web site, including the level of payments received from the seven preferred companies.

The California attorney general, who last week filed suit against Edward Jones over the mutual fund matter, pegged the total payments at $300 million. In a filing with the SEC, the firm said it received $89.9 million in 2003 and $85.9 million in 2002.

Finally, Edward Jones has until March 22 to devise an acceptable plan to distribute the $75 million required by the SEC. According to the SEC settlement, the funds will be paid to Edward Jones investors.

<SPAN =smBig>

Regulators Find Trading Abuses at Edward Jones
Smartmoney.com

In late 2003, St. Louis brokerage house Edward D. Jones & Co. took out advertisements in newspapers across the country, shaking its finger at the "anything goes" approach that led to abuses in the mutual-fund industry. Now, the company has acknowledged to the Justice Department that it failed to disclose mutual-fund sales practices that led to a $75 million penalty from regulators and a shake-up in its executive suite, Wednesday's Wall Street Journal reported.

In a Securities and Exchange Commission filing late Monday, Jones also disclosed that regulators had found thousands of instances of the firm's improperly allowing mutual-fund trades made after 4 p.m. Eastern time to receive that day's price. The practice, called late trading, is considered one of the more clear-cut and egregious abuses of the mutual-fund scandal because it can allow favored clients to skim profits from long-term investors.

Regulators didn't identify any specific instances of abusive late trading, but said Jones didn't have the proper systems in place to prevent "any unlawful late trading that may have existed." Jones settled these allegations without admitting or denying them.

The firm, which operates the largest network of retail brokerage offices in the U.S., also disclosed in the SEC filing that Doug Hill, its managing general partner, who signed the ad, is stepping down at the end of 2005 in the wake of a settlement with federal regulators over the tens of millions of dollars in undisclosed fees the firm received from mutual-fund companies to push their products.

A spokeswoman for Jones declined to comment on the filing. Tuesday, Mr. Hill's lawyer said that his client, who declined to comment, was committed to restoring the firm's image. He added that Jones never considered what it was doing to be questionable.

Federal regulators say Jones improperly encouraged its brokers to steer customers toward seven "preferred" mutual-fund companies that secretly paid the brokerage house. That practice, common in the industry, is called "revenue sharing." Jones' revenue-sharing practices were the subject of a page-one Wall Street Journal article in January 2004. Historically, 95% to 98% of Jones sales of mutual funds have been from these funds, regulators found.

Wall Street Journal Staff Reporters Susanne Craig and John Hechinger contributed to this report.

(END) Dow Jones Newswires

WHAT LEVEL OF EGREGIOUS BEHAVIOR MUST EXIST TO INCITE THE SEC AND JUSTICE DEPARTMENT TO DEMAND REMOVAL OF A COMPANY'S LEADERSHIP??

ANSWER: WHEN THE NATURE OF THAT LEADERSHIP IS CLEARLY IN CONFLICT WITH THE PUBLIC INTEREST. 

In the days to follow, when other firms are being fined, keep this in mind:  When it becomes easy to claim this is happening to everyone, ask why it was Edward Jones that was required to have it's Managing Partner step down, AND its "Executive Committee Re-constituted".

Illuminat / Zacko / other former ex-Jones IR's,

You cannot possibly imagine the amount of brainwashing going on within EDJ.  The average IR I know is incensed at the gall of the WSJ and Post Dispatch printing such nonsense.  "It is legal, it will pass, it's all good, not to worry".  Been here eight years.  What gives?  Are they brainwashed or playing it close to the vest?

You might be an idiot if.......

You became a General Partner in the last 5 years..... what an honor, and you paid to get it! I guess opening those offices in your town, hiring your future competition, giving away your clients, looks pretty stupid right now.....hope you didn't get divorced too! 

I wonder how much a RL will have to pay of the fine if he just got his $125k of GP in the last year or year and a half?