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."