WASHINGTON In the first action of its kind, the SEC has ordered St.-Louis based brokerage Edward Jones to pay $20 million for overcharging retail customers in new municipal bond sales.
"Edward Jones undermined the integrity of the bond underwriting process by overcharging retail customers by at least $4.6 million and by misleading municipal issuers," said Andrew Ceresney, director of the SEC's enforcement division. "This enforcement action, which is the first of its kind, reflects our commitment to addressing abuses in all areas of the municipal bond market."
The SEC found that the firm and Stina Wishman, the former head of its municipal syndicate desk, instead of selling new bonds to customers at the "initial offering price," took the bonds into its own inventory and then improperly sold them to customers at higher prices. Customers paid at least $4.6 million more than they should have, the SEC said.
The overcharges occurred through the offer and sale of about 156 different bond in 75 negotiated offerings in which Edward Jones served as a co-manager.
The $20 million penalty includes approximately $5.2 million in disgorgement and prejudgment interest. Wishman, who retired from the firm in 2013, agreed to pay $15,000 and is to be barred from the securities industry for at least two years.
Edward Jones neither admitted nor denied the SEC's findings but agreed to the order. The SEC said the firm violated a slew of SEC and Municipal Securities Rulemaking Board rules.
Jack Casey is the securities reporter for The Bond Buyer.
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