ej gets fined ...... AGAIN!!!!

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eddjones654's picture
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http://stlouis.bizjournals.com/stlouis/stories/2006/12/11/da ily34.html?jst=b_ln_hl
Edward Jones fined by NASD

St. Louis Business Journal - 2:34 PM CST Wednesday
Edward Jones is among four firms facing a total of $850,000 in fines by the NASD, the regulatory organization said Wednesday. The four firms also were ordered to pay an estimated $43.8 million total in remediation to clients.
NASD is a federally mandated private-sector provider of financial regulatory services.
The fines were imposed for the firms' failure to have adequate supervisory systems and procedures to identify opportunities for investors to purchase Class A mutual fund shares at net asset value (NAV), or without a front-end sales charge, according to an NASD release.
NASD said it imposed fines against St. Louis-based Edward D. Jones & Co. LP, $250,000; RBC Dain Rauscher Inc. of Minneapolis, $250,000; Royal Alliance Associates Inc. of New York City, $250,000; and Morgan Stanley DW Inc. of New York City, $100,000.
Each firm also was ordered to provide remediation to thousands of eligible clients who qualified for, but did not receive, the benefit of available NAV transfer programs, NASD said.
Based on estimates provided by each firm, NASD said Edward Jones will pay $25 million, plus interest; RBC Dain Rauscher will pay $6.8 million, plus interest; Royal Alliance will pay $1.6 million, plus interest; and Morgan Stanley will pay $10.4 million, plus interest.
The firms also are required to each retain a third-party examiner to oversee the remediation process.
In settling the matters, each firm neither admitted nor denied the charges, but consented to the entry of NASD's findings.
The firms' failure to adequately supervise the identification and implementation of NAV transfer programs deprived customers of substantial discounts on mutual fund purchases, according to a statement by James Shorris, NASD executive vice president and head of enforcement. "Securities firms must learn all of the relevant pricing features of the fund shares they sell and ensure that eligible investors receive all available discounts and sales charge waivers, without exception," he said.
NASD said that during 2002-2004, many mutual fund families offered NAV transfer programs that eliminated front-end mutual fund sales charges for certain customers. Under an NAV transfer program, customers who redeem fund shares for which they paid a sales charge are permitted to use those proceeds within prescribed time periods to purchase Class A shares of a new mutual fund at NAV, or without paying another sales charge.
NASD said it found that during the 2002-2004 period, each firm failed to have systems reasonably designed to ensure that customers received NAV pricing when appropriate, so certain investors incurred charges they should not have paid or purchased other mutual fund share classes that subjected them to higher fees.
In sanctioning Morgan Stanley, NASD said in it s release that it considered the firm's "prompt and comprehensive remedial actions."

ymh_ymh_ymh's picture
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rook4123's picture
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Looks like the GPs will have to pay it out of pocket again.

troll's picture
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rook4123 wrote:Looks like the GPs will have to pay it out of pocket again.
It's ok, they'll have plenty left.

footsoldier's picture
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Don't forget the coffers are being replenished with new money soon.

eddjones654's picture
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Based on estimates provided by each firm, NASD said Edward Jones will pay $25 million, plus interest; RBC Dain Rauscher will pay $6.8 million, plus interest; Royal Alliance will pay $1.6 million, plus interest; and Morgan Stanley will pay $10.4 million, plus interest.
More than  half of the remidation total is to be paid by the EJ.... hows the halo fitting now?

bspears's picture
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You bet...NAV'----not for the top producers...I know of a producer who moved everyone out of Putnam when they got into trouble and moved them to another fund family full load!!!!  200k gross..1 month! Now THAT IS selling without a conscience.

jones&out's picture
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It looks like to Liquidate and Transfer form didn't work so well after all.

eddjones654's picture
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If you transferred in an account in Canada which held "unapproved" funds, liquidate and repurchase in an "approved" funds is acceptable behavior...

eddjones654's picture
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hey JohnDoe,
Could you explain this current problem ..........

Incredible Hulk's picture
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jones&out wrote: It looks like to Liquidate and Transfer form didn't work so well after all.

Incredible Hulk's picture
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Have you ever transferred an account without cost basis info? This form, which should be used sparingly, saves the client and myself a serious headache if you are liquidiating an acct.

Starka's picture
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Incredible Hulk wrote: Have you ever transferred an
account without cost basis info? This form, which should be used sparingly,
saves the client and myself a serious headache if you are liquidiating an
acct.

Cost basis can generally be obtained from the clients' statements. Yours is a
sorry-assed excuse for screwing your customers.

I truly don't know how you sleep nights, Hulk.

Incredible Hulk's picture
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How many accounts have you transferred in from AGE? ML?

Incredible Hulk's picture
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I just read your last comment Starka, you are truly pathetic. How do I sleep at night? How does that yahoo broker at AGE keep a client in Putnam Vista, Voyager, & OTC? I'll sell that account out everytime and find an APPROPRIATE allocation. Schmuck. Grow up.

Starka's picture
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Incredible Hulk wrote: I just read your last comment
Starka, you are truly pathetic. How do I sleep at night? How does that yahoo
broker at AGE keep a client in Putnam Vista, Voyager, & OTC? I'll sell that
account out everytime and find an APPROPRIATE allocation. Schmuck. Grow
up.

Then be a man and liquidate when the funds come over. Why do you feel
the need to hide from compliance behind the L&T form? Answer: Because
you wouldn't know an appropriate allocation if it bit you on the leg.

Incredible Hulk's picture
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Really, how many accounts have you transferred in? Let's see, a 1099 from AGE with the CORRECT cost basis without any work on the clients part or mine. Do you really think I'd have trouble justifying (sp) this? How about a managed account with 100k in 35 stocks? Should I transfer it in and charge $50 per trade to sell it out? You are very narrow minded and quick tempered. Again, Grow Up.

Starka's picture
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Quick tempered? Over something that you post??? Hardly. (By the way,
your spelling of 'justifying' is correct.)

Why is it more moral to have the client liquidate at the other firm, if in
fact he even knows that he has a choice? Is it right, despite how many
securities are in an account, to force all of the selling into one tax year?
Do you even care about the consequences? Is your contention that ALL of
the securities in the contra account are inferior, and that you are the only
person who knows what to do? Why can't the Putnam Funds be brought
over as is, and then put into a conservative fund within Putnam? Oh,
that's right...you don't get paid. Your actions betray you, Sonny, despite
your protestations to the contrary, and give lie to the Edward Jones
mantra that you're the only ones who care about the client.

Give yourself a couple more years of experience, and you'll see how
pompous and arrogant you seem...and perhaps you'll also see that you
have nothing to be pompous and arrogant about.

Starka's picture
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Oh, and by the way...I've found that contra firms, especially the large, well-
repected firms such as you've mentioned, are open and helpful when called
for cost basis information, particularly when they are asked in a polite,
professional manner.

Incredible Hulk's picture
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A couple of points and I'm done arguing with you...

Thanks for the spell check.

I had to think about the times I've used the form as it has been awhile. I'll sell every Putnam account out every time. Period. You are doing your clients a disservice if you think that putting them into inferior funds (even if it saves them a couple of points) is a good idea. Find me a report within the last 3 years that ranks Putnam in the top 10 fund managers across the board. I'm not sure they're in the top 20. Would you leave your parents money in putnam?

As for your assertation of Jones mantra about the only firm to care about the client... I dont' know about EDJ, all I know and can control are my own actions.

6 years in the business, 4+ in production certainly doesn't make me a grizzled vet, but I've been around enough to make the comments I have made in this thread with certainty.

Case in point: an account at AGE that came over with Putnam funds dating back 4 or so years in roughly 2003. They were down substantially, (meaning no taxable gain for the slow minded) Dividends paid quarterly and short and long term capital gains were paid annually. When we requested the cost basis, they (AGE) sent the client a spreadsheet with nothing but dates of purchase and those reinvested listed separately with no totals. Can it be done? Sure, is it time consuming? When I have to walk the fine line of not offering tax advice but give them the service they expect, it becomes tedious for me. Right? You may not think so, but I can sleep well.

I've typed too much to proofread, so pardon any mistakes, but you can question EDJ all you want, but keep the personal attacks about MY ethics to yourself.

Starka's picture
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I will question you ethics at any time, so that's out of the way.

Secondly, I don't use funds at all, unless I'm looking for something special or
unusual. Again, why don't YOU do the liquidation of Putnam (or whoever)
and demonstrate to the cient that you're acting in his/her best interest?
Answer...Because you'd have some explaining to do, and deep down you
know it might be wrong.

Third, I'll ask you once again...are you suggesting that all of the securities in
the accounts that you mentioned are inferior?

Finally, you most certainly are not a grizzled vet....and in truth, you've much
to learn.

Starka's picture
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SP: your

footsoldier's picture
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Gents-
What was the topic of this thread anyway? Let's talk about real EDJ service. Cost basis is a nightmare because Jones refuses to participate in the ACAT system that INCLUDES cost basis. I remember reading the IT GP Rich Malone (has he retired yet?) monthly newsletter where this question came up and he felt that the assistants on the front lines (at the branches) were expected to retreive and input that info when assets transferred in-kind. He made it clear it wasn't worth the cost to participate.
Maybe, encouraging the liquidate and transfer concept...Easier for the firm, financially better for the rep and the firm. And the cost basis issue magically disappears.
A++ service. Not.
 

JohnDoe's picture
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eddjones654 wrote:hey JohnDoe,
Could you explain this current problem ..........Not sure what you want me to comment about?  Most of the NAV transfers I performed were from accounts I transferred in, and since I only can speak about the oversight of my own book, I wouldn't know any more about the lack of EJ's oversight than my own clients. 

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var SymReal;

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if(SymReal != null)
SymReal();
}

SymOnLoad()
{
if(SymRealOnLoad != null)
SymRealOnLoad();
window.open = SymRealWinOpen;
SymReal = window.;
window. = Sym;
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SymRealOnLoad = window.onload;
window.onload = SymOnLoad;

//-->I do know of other brokers at Jones that liquidated and bought other funds both before and after the NAV exchange period, and our compliance dept forced NAV trades onto the broker (rightfully so).  So I don't know where the oversight was inadequate, and since the article doesn't tell us, I can't comment on it.If I had a guess, it would be that some field supervision guys weren't doing their job, and brokers got away with what I described above.

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jd,
repaying $25 million in commission (by your employer's estimate) the entire FS department must have been taking a few days off in order such a volume to occur.
     nudge nudge wink wink!!     say no more say no more

Devoted SA's picture
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Starka wrote:Oh, and by the way...I've found that contra firms, especially the large, well- repected firms such as you've mentioned, are open and helpful when called for cost basis information, particularly when they are asked in a polite, professional manner.
Actually Starka & Hulk I'll go one step farther in this debate about cost basis reporting in the midst of ACAT's & throw in my $.02 for what it's worth.
The "Cost Basis Reporting Service" (CBRS) is a subsidiary of DTCC and provides brokerages doing ACATs with the original cost basis information, if both sending and receiving firms are subscribers.
There are currently 29 firms enrolled (according to LPL's BranchNet). All of the ACAT's I have done recently from MSDW, Merrill and AGE have all come with cost basis provided.
Here is a link to the DTCC site...maybe you can suggest this in the suggbox Hulk. I am surprised Edward Jones is not enrolled, it seems to me that would be something they'd jump on?

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eddjones654's picture
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If you search through the DTC site you'll see the the following:
BOARD OF DIRECTORS: BIOGRAPHIES
NORMAN L. EAKER is General Partner of Edward Jones. He is responsible for Global Operations in the United States, Canada and the United Kingdom. He previously held the positions of Director of Internal Audit, Head of Mortgage Operations and held various leadership roles within Operations. Prior to joining Edward Jones, Mr. Eaker worked as a Certified Public Accountant for Peat, Marwick & Mitchell & Co. from 1978 through 1981. He is a member of the SIA Operations Committee, and a former member of the Chicago Stock Exchange Board of Governors
  

advisor1's picture
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There are several reasons why Jones does not belong to Cost Basis 1) when you transfer in a B or C share of a mutual fund and you sell the fund at Jones you do not have to reciprocate the CDSC back to the surrendering firm. Yes I have seen this done. 2) by not knowing the cost basis on a fund you don't have to report it on the 1099 when sold, and you can play stupid at capital gain time. Mr. Eaker comes from a CPA background, and I'm sure the cost basis issue is beyond his control.

Philo Kvetch's picture
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"Play stupid at capital gains time"?????????

Well, every time you think you've heard it all.......

Spaceman Spiff's picture
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advisor1 wrote:There are several reasons why Jones does not belong to Cost Basis 1) when you transfer in a B or C share of a mutual fund and you sell the fund at Jones you do not have to reciprocate the CDSC back to the surrendering firm. Yes I have seen this done. 2) by not knowing the cost basis on a fund you don't have to report it on the 1099 when sold, and you can play stupid at capital gain time. Mr. Eaker comes from a CPA background, and I'm sure the cost basis issue is beyond his control.
Are you stating this as fact because you have intimate knowledge of the inner workings of EDJ and the GP level decisions that are made?  Or are you just spouting off? 

troll's picture
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advisor1 wrote:There are several reasons why Jones does not belong to Cost Basis 1) when you transfer in a B or C share of a mutual fund and you sell the fund at Jones you do not have to reciprocate the CDSC back to the surrendering firm. Yes I have seen this done. 2) by not knowing the cost basis on a fund you don't have to report it on the 1099 when sold, and you can play stupid at capital gain time. Mr. Eaker comes from a CPA background, and I'm sure the cost basis issue is beyond his control. Hey Mr. Know it All....NOBODY reports cost basis on their 1099's because the IRS doesn't require it.  No financial institution is going to voluntarily report more of their client's information on a 1099 than the IRS requires.

footsoldier's picture
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Space-
You are clueless. The GP's would incur a cost that they would have to pay or perhaps pass on to the only profit center. Or have you forgotten. By the way. what is s the bill when your T-1 is working? The same as the old technology. I am estimating the real cost is 20-25% of the satellite technology.
How does that wash with the greatest salesforce in the world? You are being manipulated always as an employee at Jones.

advisor1's picture
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yes I know for a fact about the CDSC

Spaceman Spiff's picture
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footsoldier wrote:
Space-
You are clueless. The GP's would incur a cost that they would have to pay or perhaps pass on to the only profit center. Or have you forgotten. By the way. what is s the bill when your T-1 is working? The same as the old technology. I am estimating the real cost is 20-25% of the satellite technology.
How does that wash with the greatest salesforce in the world? You are being manipulated always as an employee at Jones.

How did we go from talking about cost basis to asking about the cost on my T-1 line?  Anyway that was a great question and I'm glad you asked.  Since I just got my T-1 line today I haven't seen the impact on my P&L.  I did take the time to find the answer to your question though.  (That's A++ service in case you didnt' recognize it) According to a Suggbox wire from early Dec the P&L isn't going to change.  The answer they gave is that there is more to that line item than just the satellite.  It includes "the workstations, printers, and other hardware; software; phone equipment; and the associated maintenance and support costs."  They also said that this is the largest, most expensive undertaking ever taken on at Jones as far as technology goes and they are trying to not raise the P&L line item to compensate. 
By the way, I'm not clueless, just blissfully unaware.

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They also said that this is the largest, most expensive undertaking ever taken on at Jones as far as technology goes and they are trying to not raise the P&L line item to compensate. 
Wow, another Jones rocket scientist.  The best case scenario you can paint here is that they were grossly overcharging you before.
 

footsoldier's picture
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SS-
By the way, I'm not clueless, just blissfully unaware.
 
Keep chugging it dude. When you choke on it, you will see the light. BTW... Dec was my best month ever in the biz. I had better gross days at Jones, but nothing close on the net to me side (you know Mr. Blissful, what you can spend on Kool-Aid)!!

midtown's picture
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The gross overcharging previously or the magnaminous gesture to hold
the line on the P&L is certainly not yet again another example of
edj doublespeak. So you edj bashers take it easy on the kool aid
chuggers.
And you chuggers - ignore the man behind the curtain -.
We cannot allow GP allocations to suffer and we cannot allow $24
million to not go to the top 6 guys in bonuses (one of whom is the head
of "technology").

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