ACC Finds Supervisory Failures with Respect to Class A Mutual Fund Shares

Phoenix, Ariz. - The Arizona Corporation Commission has joined a $17 million enforcement settlement with securities dealer Edward D. Jones & Co., L.P. (Edward Jones).

This settlement resulted from a multi-state investigation into Edward Jones’s supervision of customers paying front-load commissions for Class A mutual fund shares in light of later moving brokerage assets into fee-based investment advisory accounts.

The four-year investigation was led by a working group of 14 state securities regulators that are members of the North American Securities Administrators Association (NASAA). The regulators looked into the securities dealer’s supervision of customers moving from brokerage to advisory accounts in light of the 2016 U.S. Department of Labor (DOL) Fiduciary Rule that would make investment advice to retirement accounts subject to a fiduciary standard of care.

The investigation found that Edward Jones charged front-load commissions for investments in Class A mutual fund shares in situations where the customer sold or moved the mutual fund shares sooner than originally anticipated. The states found gaps in Edward Jones’s supervisory procedures in this respect.

As part of the settlement, Edward Jones will pay each of the 50 states, Washington, D.C., the U.S. Virgin Islands, and Puerto Rico an administrative fine of approximately $320,000. In evaluating the supervisory failures and determining the appropriate resolution, the states considered certain facts such as the positive performance of the investment advisory accounts as compared to the brokerage accounts.

“In partnership with NASAA and other state securities regulators, we will continue to protect investors and ensure that companies operating in Arizona follow our securities laws,” said Chairman Kevin Thompson. “Any securities dealer that offers both brokerage and investment advisory services should be mindful that their customers are receiving the desired services at an appropriate cost.”

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