The information was published by the company on its Web site as part of a $75-million settlement with regulators over charges of hiding such payments. The company has neither admitted nor denied the allegations, but reached the settlement with the SEC, the New York Stock Exchange, NASD and the US Attorney’s office in St. Louis (See Edward Jones Settles with Regulators over Secret Payments from Mutual Funds ).
The charges stem from the company’s practice of promoting “best funds” without telling investors that it takes money from firms hoping to get on the list. The practice is allowed, but not if investors are not informed and if fund companies have used fund assets to improperly cover trading commissions.
“This group of fund families has greater access to our investment representatives to provide training, marketing support and educational presentations,” the company said in the Web site statement. “Consequently, while our investment representatives are free to sell, and our customers are free to select funds from many mutual fund families, virtually all of Edward Jones’ transactions relating to mutual funds involve preferred family funds.
While admitting that fund families not on the list don’t make these type of payments to the firm, the company said the fee arrangement is only one thing it considers when deciding whether to put a fund provider on its “preferred” list.
“If you own a preferred fund, or if you are interested in our preferred fund families, we want you to be aware of our revenue sharing arrangements,” the company’s Web statement continued. “Edward Jones receives payments known as revenue sharing from the preferred fund families. While the receipt of revenue sharing is among the factors that determine whether a fund is treated as ‘preferred,’ such payments are not the only factor considered in deciding which fund families are designated as preferred. The firm does not receive revenue-sharing payments from any non-preferred mutual fund families.”
According to the Web statement, the payments from each fund family adviser or distributor from January through November 2004 included:
- American Funds Distributors, Inc. – $27.2 million
- Federated Investment Management Co.; Federated Global Investment Management; Federated Equity Management Co. of Pennsylvania – $1.3 million
- Goldman Sachs Asset Management, L.P. and/or Goldman Sachs & Co. – $3.7 million
- Hartford Investment Financial Services, LLC – $16.6 million
- Lord Abbett Distributor LLC – $10.6 million
- Putnam Retail Management Limited Partnership – $9.8 million
- Van Kampen Funds, Inc.- $13.2 million.
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