VERMONT DEPARTMENT OF FINANCIAL REGULATION JOINS $17 MILLON MULTI-STATE ENFORCEMENT SETTLEMENT WITH EDWARD JONES
Multi-State Working Group Finds Supervisory Failures Concerning Class A Mutual Fund Shares
Montpelier, VT - The Vermont Department of Financial Regulation (DFR), a member of the North American Securities Administrators Association (NASAA), has joined a $17 million settlement with Edward D. Jones & Co., L.P. (Edward Jones) resulting from 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 fee-based investment advisory accounts.
The four-year investigation, led by a working group of 14 state securities regulators, 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. DFR assessed Edward Jones an administrative fine of $272,641.52. Edward Jones also agreed to contribute $48,113.20 to the Vermont Financial Services Education and Victim Restitution Special Fund. 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 as compared to the brokerage accounts.
“In partnership with NASAA and other state securities regulators, we will continue to protect Main Street investors and ensure that companies operating in Vermont continue to follow our securities laws,” said Securities Deputy Commissioner, Amanda Smith. “DFR appreciates the ongoing cooperation of Edward Jones throughout this investigation and settlement process. Firms that offer both brokerage and investment advisory services should be mindful that customers are receiving the services the customer wants at an appropriate price.”
The consent order is located on the Vermont Department of Financial Regulation website. Investors can contact DFR Securities with any questions or concerns by calling 1-877-550-3907 or emailing dfr.securitiesinfo@vermont.gov.