Edward Jones agreed to pay $75 million, $37.5 million in disgorgement and $37.5 million in fines, to the Securities and Exchange Commission for failing to properly disclose revenue-sharing and directed-brokerage agreements with seven mutual fund companies. In total, the brokerage promoted only 110 funds from those seven families since the 1990s, the SEC said. Many of the fund companies paid 25% of the advisory fees in revenue-sharing payments, and Edward Jones periodically sought to negotiate additional revenue-sharing payments from the preferred fund companies, the SEC said.
These revenue-sharing agreements have been highly profitable for Edward Jones, the SEC said, noting that since 1999, the firm has collected “tens of millions of dollars from the preferred families each year,” although the SEC did not specify exactly how much.
As part of the settlement, in which the firm neither admitted to nor denied guilt, the firm will increase disclosures on its website about its preferred mutual fund program, including the amount of revenue it receives from the fund companies in exchange for promoting their funds.
