Multistate Investigation Finds Supervisory Failures During Brokerage Account Conversions to Advisory Accounts

Consent Order

TRENTON – Attorney General Matthew J. Platkin and the Division of Consumer Affairs today announced that the Bureau of Securities has joined a $17 million nationwide multistate settlement with Edward D. Jones & Co., L.P. (Edward Jones) resulting from a probe into the broker-dealer’s supervision of financial professionals moving customers’ commission-based brokerage accounts to fee-based investment advisory accounts.

The four-year investigation was led by a working group of 14 state securities regulators, including the Bureau of Securities.

During a two-year period, Edward Jones supervised financial professionals who moved investors’ funds from brokerage to advisory accounts. The investigation found that when collecting advisory fees from these customers, Edward Jones improperly failed to credit them for commissions that had already been paid. As a result, investors were overcharged. The states also found gaps in how Edward Jones supervised the transfer of customer accounts and the imposition of fees on investors.

“My office will continue to protect individual investors by ensuring that firms comply with our securities laws,” said Attorney General Platkin. “New Jersey investors deserve the fullest protections under the law, including reasonable supervision over their investment accounts. Firms that fail to provide that will be held accountable.”

“The firms that serve New Jersey investors are obligated to have policies in place to protect their customers,” said Cari Fais, Director of the Division of Consumer Affairs. “The settlement announced today demonstrates our continuing commitment to ensuring that firms doing business in New Jersey meet that standard.”

“Firms that offer both brokerage and investment advisory services must ensure that clients are receiving their desired services at an appropriate price,” said Elizabeth M. Harris, Bureau Chief of the Bureau of Securities. “Changes to a customer’s account type should be supervised correctly to ensure that they are not charged twice in the form of both a commission and an advisory fee.”

As part of the settlement, each of the 50 states, Washington, D.C., the U.S. Virgin Islands, and Puerto Rico will receive an administrative fine of approximately $320,000. New Jersey will also receive an additional $15,000 to cover investigative costs for its role as a leader in the investigation.

The Bureau’s investigation was handled by Deputy Chief Amy Kopleton, Supervising Investigators Rachel Glasgow and Judith Keilp, and Investigator Perry Traina of the Bureau of Securities, within the Division of Consumer Affairs.

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The Bureau is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. The Bureau encourages investors to “Check Before You Invest” by obtaining information, including the registration status and disciplinary history, of any financial professional doing business in or from New Jersey. Investors should contact the Bureau toll-free within New Jersey at 1-866-I-Invest (1-866-446-8378) or from outside New Jersey at (973) 504-3600, or by visiting the Bureau’s website at www.NJSecurities.gov. Investors can also contact the Bureau for assistance, or to raise issues or complaints about New Jersey-based financial professionals or investments.

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