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
New York Stock Exchange
ends an inquiry
first reported by
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.