Working group finds supervisory failures with Class A mutual fund shares

SANTA FE – The New Mexico Securities Division, 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) after an investigation into the broker-dealer's supervision of customers paying front-load commissions for Class A mutual fund shares then later moving brokerage assets into fee-based investment advisory accounts.

The four-year investigation was led by a working group of 14 state securities regulators and looked into Edward Jones's supervision of customers moving from brokerage to advisory accounts despite the 2016 U.S. Department of Labor Fiduciary Rule that would make investment advice to retirement accounts subject to a fiduciary standard of care.

"In partnership with NASAA and other state securities regulators, we will continue to protect investors and ensure that companies operating in New Mexico follow our securities laws," said New Mexico Securities Division Acting Director Benjamin Schrope. "We appreciate 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 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. 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.

The settlement is posted on the New Mexico Securities Division's website here. New Mexico residents who have questions about this settlement should contact the Securities Division at 505-476-4580 or online at www.rld.nm.gov/securities-division.