Texas Joins Multi-State Settlement with Edward Jones
Texas State Securities Board
AUSTIN, TEXAS (News Release) - The Texas State Securities Board announced that it has joined a multi-state settlement with Edward D. Jones & Co., L.P. (Edward Jones) which will see Edward Jones pay $17 million in penalties for supervisory failures that affected main street investors.
The four-year investigation was a coordinated effort by a working group of 14 state securities regulators: Alabama, Arkansas, Connecticut, Florida, Indiana, Massachusetts, Michigan, Montana, New Jersey, Nevada, Ohio, Texas, Washington, and Wisconsin; with Texas and Montana’s former Deputy Securities Commissioner, Brett Olin, taking the foremost lead.
The investigation was sparked by Edward Jones’ failures in supervision of moving some customers from brokerage to advisory accounts in light of the 2016 U.S. Department of Labor (DOL) Fiduciary rule that would make investment advice to retirement accounts subject to a fiduciary standard of care.
Edward Jones’ financial advisors initially offered certain brokerage customers investments with the goal of achieving diversification and investing for the long term mainly through mutual funds. Customers were eligible to purchase Class A, B, or C shares, with the most common share class being Class A. Around 2013, Edward Jones’ advisors began exploring new investment advisory services through fee-based advisory accounts that differed from commission-based brokerage accounts.
Additionally, Edward Jones charged advisory fees that were not fully prorated against front-load fees that customers had already paid for investments in Class A mutual fund shares. The states also found gaps in Edward Jones’ supervisory procedures surrounding these account conversions.
Notably, Texas found no evidence of willful or fraudulent conduct by Edward Jones, and Edward Jones fully cooperated with the investigation. Further, Edward Jones neither admits nor denies the findings as set out in the order.
“Our priority has and will always be to protect Texas investors,” said Commissioner Travis J. Iles. “We are beyond pleased with the efforts of the states, the ongoing cooperation from Edward Jones, and their commitment to compliance. Texas Deputy Commissioner Cristi Ramón Ochoa was a keystone to this resolution.”
