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Edward Jones Agrees To Pay $20 Million SEC Fine, Highlighting Larger Issue

When brokerage firm Edward Jones agreed to pay over $20 million to settle Securities and Exchange Commission charges it overpriced new issues of municipal bonds, neglecting to mention the additional fees to clients, in doing so it opened up a larger regulatory issue. In the wake of the brokerage firm's failure to disclose fees, the SEC revealed a potential hole in regulatory rules that do not require dealers to disclose their markups on such offerings – and the SEC wants to see regulatory action taken on the issue, as it looks at FINRA and another regulator to get the job done.

Edward Jones
Edward Jones agrees to pay $20 million, $5.2 million to clients and $15 million in penalty

In the recently settled complaint, the SEC charged that from February 2009 to December 2012 Edward Jones took new bonds into inventory and then increased the price to clients over and above the fees they charged. The additional markup was not disclosed to investors as they sold new issue bonds at higher prices once secondary trading had begun. The SEC also charged the firm with general supervisory failures in its review of secondary-market municipal bond trades.

Edward Jones added this extra fee on 156 different bond offerings under which the firm served as co-manager, collecting $4.6 million in additional revenue from customers, the SEC said in its...