Edward Jones must pay a former client a half a million dollars over allegations the firm disbursed money to her ex-husband without her consent.
A FINRA arbitration panel ruled against the firm last month in a yearslong case featuring a top Edward Jones advisor in North Dakota: Troy Nelson, who oversaw $638 million for more than 600 clients, according to a
Former client Sandra Hendricksen Martire alleged that the firm and advisor had favored her husband during and after divorce proceedings — even though both spouses were clients.
“Divorce and death are often a customer’s time of greatest need,” says attorney J. Owen Murrin, who represented Martire. “This is a time when a broker’s fairness and neutrality are considered critical. If a conflict of interest arises, a broker must withdraw and not try to serve two masters, in this case two conflicting customers with two conflicting interests.”
An Edward Jones spokesman said in an emailed statement that the firm was evaluating whether to appeal the arbitrators’ ruling. “This matter has had a long and contentious litigation history and we're disappointed with the arbitrators’ decision.”
The firm did not address questions regarding its policies around divorce and clients assets or Nelson’s role in the matter. Neither the Bismarck-based advisor nor his attorney in the arbitration could not be reached for comment.
In arbitration, Martire accused Edward Jones of disbursing marital funds to her former husband from a restricted account, without her knowledge or authorization; unreasonably withholding marital assets awarded to her; and neglecting to terminate life insurance policies in custodial accounts held in trust at Edward Jones, resulting in the depletion of the cash value of custodial accounts. The firm contested these and other claims in arbitration.
The firm’s actions ended up leaving Martire “on the short end of the stick during the divorce,” Murrin says.
Richard Chambers is the CEO of Richard F. Chambers & Associates, a global advisory firm for internal audit professionals, and also serves as senior advisor of risk and audit at
Joe Nestlerode is a partner at Alpha FMC with over 28 years of industry experience in senior technology and business roles in the wealth management industry.
He has overseen large strategic engagements including M&A, advisor platform development, client portal design and development and capability optimizations across front-, middle- and back-office functions. Prior to joining Alpha FMC, he was a product and technology executive for the RIA, IBD and 1099 channels at Wells Fargo Advisors.
Could an economic downturn slow the industry's record-setting pace of acquisition deals? Sure, experts say, but not by much.
“Since Edward Jones did not withdraw from this conflict of interest and could have, Edward Jones became perceived as an aider and abettor, participant and joint conspirator and liable for damages caused by the husband’s unauthorized transfer of assets, and for Edward Jones’ mishandling of marital and family assets generally,” the Long Beach, California-based attorney says.
The firm and Nelson were also accused of breach of fiduciary duty, an obligation a company executive contested during arbitration hearings. “Advisors don't act as a fiduciary at Edward Jones,” the executive said, according to a transcript of the hearing.
Asked to repeat the answer by an arbitrator, the executive responded: “Sure. Edward Jones, our financial advisors do not act as fiduciaries.”
Martire and her husband had been longtime clients of Edward Jones when the couple’s divorce proceedings started in 2008. In December 2014, Martire contacted FINRA. She briefly dismissed her claims, but sought to reinstate them in 2017 after Edward Jones and Nelson sought to expunge his record, according to a copy of the arbitration award.
Nelson has three disclosures listed on
Although the panel of three arbitrators ultimately ruled in Martire’s favor, the sum was less than the $1 to $5 million she sought.
However, the panel did deny Nelson’s expungement request and ordered Edward Jones to pay the full cost — $33,075 — for 22 hearings sessions.
“This case is unique because it provides an award to a customer for a brokerage firm’s transgressions, an award not related to any investment performance in the accounts,” Murrin says.
