State Auditor Announces Settlement With Edward Jones
James Brown, Montana State auditor and commissioner of securities and insurance, a member of the North American Securities Administrators Association (NASAA), has announced a $17 million settlement with Edward D. Jones & Co., L.P. (Edward Jones). This settlement is a result of an investigation into the broker-dealer’s supervision of customers paying front-load commissions for Class A mutual fund shares in light of later moving brokerage assets into feebased investment advisory accounts.
“In partnership with NASAA and other state securities regulators, we will continue to protect Main Street investors and ensure that companies operating in Montana follow our securities laws,” said Brown, adding, “Our agency appreciates the ongoing cooperation of Edward Jones throughout this investigation and settlement process. Firms that offer brokerage and investment advisory services should be mindful that customers are receiving the services they want at an appropriate price.”
The four-year investigation, by a working group of 14 state securities regulators led by Montana and Texas, investigated Edward Jones’s supervision of customers moving from brokerage to advisory accounts in light of the 2016 U.S. Department of Labor (DOL) Fiduciary Rule, which would make investment advice to retirement accounts subject to a fiduciary standard of care.
The investigation found that Edward Jones charged front-load commissions for investments in Class A mutual fund shares in situations where the customer sold or moved the mutual fund shares sooner than originally anticipated. The states found gaps in Edward Jones’s supervisory procedures in this respect.
As part of the settlement, Edward Jones will pay each of the 50 states, Washington, D.C., the U.S. Virgin Islands, and Puerto Rico an administrative fine of approximately $320,000. Montana was a lead state in this investigation, so it received an additional payment of $15,000 for its administrative and investigatory costs. In evaluating the supervisory failures and determining the appropriate resolution, the states considered certain facts, such as the positive performance of the investment advisory accounts compared to the brokerage accounts.
For inquiries, contact David Sanders, CSI Communications, at 406-444-3778 or dsanders@mt.gov.
