Maryland has joined a multistate settlement agreement with stock brokerage firm Edward D. Jones & Co., L.P. (Edward Jones), following a four-year investigation into the company’s handling of Class A mutual fund shares. The settlement, valued at $17 million, addresses the firm’s supervisory lapses related to customers paying front-load commissions and moving their investments into fee-based advisory accounts.
Attorney General Anthony G. Brown, whose Securities Division participated in the investigation as part of the North American Securities Administrators Association (NASAA), announced the settlement, highlighting its significance for both investors and the integrity of Maryland’s economy.
“Maryland’s securities laws protect not just investors but the integrity of our state’s economy,” said Maryland Attorney General Brown. “Investment firms must ensure their practices align with their customers’ best interests and avoid taking advantage of regulatory changes to increase profits.”
“My office will continue to protect individual investors by ensuring that firms comply with our securities laws,” said New Jersey Attorney General J. Platkin. “New Jersey investors deserve the fullest protections under the law, including reasonable supervision over their investment accounts. Firms that fail to provide that will be held accountable.”
The inquiry centered on Edward Jones’s operations following the 2016 U.S. Department of Labor Fiduciary Rule, which mandated that investment advice for retirement accounts adhere to a fiduciary standard. The investigation uncovered that the brokerage firm imposed front-load commissions on Class A mutual fund shares, even when clients sold or transferred their shares sooner than anticipated. This practice often led to clients incurring higher fees than they had expected.
“Today’s settlement shows once again that state securities regulators will take decisive action to protect investors,” said NASAA President and Administrator of the Division of Securities, Wisconsin Department of Financial Institutions, Leslie Van Buskirk. “State securities regulators continue to lead the effort to ensure that firms always have their customers’ best interest in mind,” Van Buskirk added. “I want to thank the members of the multi-state working group for their diligence and hard work.”
“In partnership with NASAA and other state securities regulators, DFI will continue to protect investors and ensure that companies operating in Washington State follow our securities laws,” The Washington State Department of Financial Institutions (DFI) Securities Division. “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.”
A coalition of 14 state securities regulators, including those from Maryland, spearheaded the investigation, which highlighted deficiencies in Edward Jones’s oversight of these transactions.
As part of the settlement, Edward Jones is set to pay an administrative penalty of around $320,000 to each of the 50 states, Washington, D.C., the U.S. Virgin Islands, and Puerto Rico, totaling $17 million. The states’ examination of Edward Jones’s supervisory shortcomings also assessed the performance of the impacted investment advisory accounts, which were determined to be more advantageous for the clients than the brokerage accounts.
The settlement serves as a reminder to investment firms about the importance of regulatory compliance and safeguarding the interests of their customers.
“In partnership with NASAA and other state securities regulators, we will continue to protect Main Street investors and ensure that companies operating in South Carolina follow our securities laws,” said Attorney General Alan Wilson. “We appreciate Edward Jones’s ongoing cooperation 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.”
