Edward Jones Settles Fund Charges

It will pay $75 million for pushing certain fund families.
Publish date:

St. Louis brokerage

Edward Jones & Co.

agreed to pay $75 million to settle charges that it pushed certain mutual funds because of secret revenue-sharing agreements.

The settlement announced Wednesday with the

Securities and Exchange Commission

, the


and the

New York Stock Exchange

ends an inquiry

first reported by


last December.

Regulators alleged Edward Jones had revenue-sharing agreements with seven mutual fund groups that it touted as "preferred families" to customers ostensibly because of their "long-term investment objectives and performance." The brokerage reaped tens of millions of dollars a year from selling the funds, a fact that it kept from its investors.

"Historically," the SEC said, "over 95% of Edward Jones' sales of mutual fund shares have been sales of the seven preferred families."

In return for shared revenue, the funds got exclusive shelf space at the brokerage and exclusive access to Edward Jones' investment representatives and customers, the regulators alleged.

"Edward Jones' undisclosed receipt of revenue sharing payments from a select group of mutual fund families created a conflict of interest," the SEC said in a release. "When customers purchase mutual funds, they should be told about the full nature and extent of any conflict of interest that may affect the transaction. Edward Jones failed to do that."

Edward Jones will pay the $75 million in disgorgement and civil penalties into a fund for distribution to its customers. It will post information to its Web site on revenue sharing payments and hire an independent consultant to review and make recommendations about its disclosures.