A California judge tossed out a shelf-space fraud case brought against St. Louis-based Edward Jones, according to the Los Angeles Times.

Superior Court Judge Loren McMaster said that securities-industry disclosure rules are a federal, not a state, issue.

This is the second time a judge has dismissed a mutual fund industry-related case brought by California State Attorney General Bill Lockyear. Last year, Lockyear sued Los Angeles-based American Funds for violating disclosure rules. The judge in that matter also backed off from the case, which he said was federal jurisdiction.

Lockyear is appealing that case, and Tom Dresslar, a spokesman for the Attorney General, said he would also appeal last week's Edward Jones decision.

Filed in 2004, Lockyear's case claims that Edward Jones did not tell clients about sales agreements and incentives offered to distributors. In Dec.ember 2004, the brokerage house agreed to pay $75 million and significantly increase disclosures in its documents to stop a Securities and Exchange Commission investigation into sales practices.

Richard Phillips, an attorney with Kirkpatrick & Lockhart in San Francisco said that the reason that in 1996 federal law determined the information to be required in mutual fund prospectuses is to avoid having "50 different regulatory systems."

Although they cannot enact their own disclosure requirements, federal law does allow states to file fraud cases against mutual fund companies, Dresslar noted.

"We want compensation--damages and restitution," said Lockyear. No dollar amount has been named for damages in either case.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

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