Edward Jones, regulators reach $17M deal over mutual fund transfers

State regulators have reached a $17 million settlement with Edward Jones over its advisors charging commissions for mutual fund sales and then moving the fund shares into advisory accounts.

The North America Securities Administrators Association, which represents state and provincial industry watchdogs, announced the settlement Wednesday with the St. Louis-based wealth management giant. Edward Jones, which has more than 20,000 advisors in the U.S. and Canada, agreed to pay administrative fines of roughly $320,000 to each of the 50 states, as well as the District of Columbia, the U.S. Virgin Islands and Puerto Rico.

NASAA said a group of 14 state regulators began investigating Edward Jones four years ago in relation to a now-defunct federal rule meant to subject advisors giving retirement recommendations to the fiduciary obligation to always put their clients' interests first. The regulators found that Edward Jones advisors had charged commissions on mutual funds bought through brokerage accounts and then moved the fund shares over to fee-generating advisory accounts "sooner than expected."

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NASAA said investigators uncovered flaws in Edward Jones' supervisory procedures.

"State securities regulators continue to lead the effort to ensure that firms always have their customers' best interest in mind," said Leslie Van Buskirk, NASAA president and the administrator of the Wisconsin Department of Financial Institutions' division of securities.

Edward Jones said in a statement that its advisors "take a personalized approach to understanding our clients' needs and objectives.

"We are aligned with regulators that protecting investors is a top priority and we are committed to maintaining robust supervisory and compliance systems and continually improving them."

Edward Jones was similarly accused in 2018 of not looking out for its clients' interests by allowing advisors to move assets held in brokerage accounts into fee-generating advisory accounts. The plaintiffs in the case noted they were infrequent traders. They argued they would have been better off paying commissions on every single transaction they approved rather than a recurring fee set at a percentage of their total assets under management.

The judge overseeing the case eventually dismissed the complaint after finding that Edward Jones advisors' fiduciary duty couldn't have applied to clients whose assets weren't in advisory accounts yet.

Separately, Edward Jones joined its rival firms Osaic and Cambridge Investment Research in December in refunding clients $8.2 million to settle Financial Industry Regulatory Authority allegations that they charged mutual fund fees that should have been waived. Edward Jones' portion of the total was $4.44 million for allegedly unnecessary sales charges and fees collected between January 2015 and June 2020.