Edward Jones Settles with Regulators over Secret Payments from Mutual Funds

December 20, 2004 (PLANSPONSOR.com) - Edward D. Jones & Co. has settled with the Securities and Exchange Commission, the New York Stock Exchange, and the National Association of Securities Dealers over charges of promoting certain mutual funds without disclosing that they were paid money by firms wishing to get on the list.

The brokerage has agreed to pay $75 million in fines, a deal that the SEC still must approve. The agency’s enforcement department has approved it, however, according to CBS MarketWatch.

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, MarketWatch reported.

Separately but in a related move, California attorney general Bill Lockyer filed suit against the brokerage over the practice, according to  a statement on Lockyer’s Web site. The complaint charged that seven mutual fund companies – including American Funds, Federated Investors, Goldman Sachs Group, Hartford, Lord Abbett, Putnam Investments and Van Kampen Investments – paid to get on favorable lists at the company. Lockyer alleged that Jones collected around $300 million in payments from the funds.