Jones Pays

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Not1ofthem's picture
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Joined: 2004-12-27

Quite certain it will blow over and no, Jones won't end up selling out. 
Doug leaving?  Is that official?  Oh well.  Still won't mean much to the average joe schmoe investor in po-dunk USA who invests with the local guy who he's known since childhood.  I would be terribly surprised if any of this has much of an effect on Edward D. Jones at all.  From what I gather they are pretty over-capitalized anyway and the only ones affected were the GPs.  Most brokers I know of report that they have had almost no calls on it from their clients...more calls from other brokers than anything else. 

megdawg's picture
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Joined: 2004-12-23

Player sounds like a failed Jones broker that now sells annuities from a bank branch. You're not smart enough to be an indy. Jones will survive and come out much stronger.
 

frankstrom's picture
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Joined: 2004-11-30

I am glad to see Hill go.  Not becuase I want to see Jones hurt but believe he was bad for Jones.
In the past couple of years I have not said Jones has done anything smart but how they are handling the internals on this whole things is great.  The GPs are the ones paying for it, as it should be.  And the life blood of Jones are the people that are in-line for LP or have LP.  These are the people that are profitable and are pulling the weight.  Brilliant in paying these people out.  They legally couldn't continue the offering but nothing stopping from paying them.
 

Starka's picture
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Joined: 2004-11-30

The only concern I have in this entire fiasco is for the honest men and women of our profession who had accepted the statements from John Bachmann and Doug Hill that theirs was THE honest firm, a lonely beacon of honor among the squalor of wire houses.  How do you think it feels going to work the next morning?

Player's picture
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Joined: 2004-12-08

megdawg,
It appears I hit a nerve with you, stop the personal slamming, realize Jones is changed forever, and all your hoping will not change it ! 
The three of you above must be drinking the Kool Aid by the gallon, when the letters go out to the clients of Edward D Jones & Company,
the crap will hit the fan like never before, for the first time you will be on the defensive, and the rest of the Brokers will be sharing the Good News with your clients, not the Home Office.
It was interesting to read frankstrom comments, he is with Jones , and it still defending them.   Listen closely, Jones settled this close to Christmas to reduce the fallout, however California will not fall so easily.   Also, all of us X-Jonsers will pass the word, when clients find out how deceptive Jones was to try and lesson the fallout, it will be even worse, remember Water Gate, the cover-up was worse than the act, Didn't the GP's learn anything from Tricky Dick ?    I contacted 4 old Jones clients today, and informed them of the Good news, the transfer forms are in the mail, I can't wait to talk to more tomorrow...the cover-up is the worst part of it !
What is really amazing to me and it shows how far this once great Firm has fallen, is the rationalization of the three of you that everything is ok.....that speaks louder that anything you have written...doesn't it ?  
The real loosers here are the clients the are loosing faith in our entire system, isn't it ?

Jonestown's picture
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Joined: 2004-12-01

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Edward Jones chief will leave top post By Of the Post-Dispatch Monday, Dec. 27 2004 With a $75 million scandal hanging over it, Edward Jones announced Monday that its top executive will give up his post on Dec. 31 next year. Douglas Hill will step down as managing partner of the Des Peres-based brokerage firm, amid investigations by federal regulators and the U.S. Justice Department. Hill, who has headed Edward Jones since Jan. 1, will remain with the company as a partner. In a letter to employees Monday, Hill said the firm is looking for a successor. Last week, the U.S. Securities and Exchange Commission disclosed that Edward Jones received "tens of millions of dollars" from 1999 through this year to place seven mutual fund companies on a "preferred" list. While the payments were not illegal, Edward Jones fell short of its requirement to notify investors, the SEC ruled in imposing the $75 million penalty. The California attorney general's office, which filed suit against Edward Jones last week, put the revenue-sharing payments at $300 million. In a filing Monday with the SEC, Edward Jones said it will take a $50 million charge against profits to pay the penalty. Those funds will be drawn from 420 top partners who receive annual profit sharing. The remaining $25 million will come from an existing legal reserves account. Hill will pay "a disproportionate share" of the penalty, about $3 million, Edward Jones said. It did not disclose how much any other executive will pay. Last year, before Hill's promotion to managing partner, he was paid $4.5 million: $200,000 in base salary and $4.3 million in profit sharing, according to an SEC document. Hill, 60, succeeded John Bachmann, who stepped aside as managing partner at age 65 as mandated by company policy. Hill declined to comment. But in a prepared statement, his attorney, Gordon Ankney, said: "Doug is determined to help restore (Edward Jones') well-founded reputation as a leading advocate for individual investors, while not allowing his personal future to become a possible source of controversy." Ankney said the public has not been given an accurate portrayal of Edward Jones' actions. He noted that the company had a small list of preferred mutual-fund companies long before it accepted payments from them. "By focusing on a limited number of fund families, (Edward Jones) can effectively monitor the long-term performance of the funds offered and ensure that its investment representatives receive adequate customer service support from the fund families," he said. Ankney also touted Edward Jones' core investment philosophy, which urges customers to hold funds for long periods, rather than churning them frequently. Had clients bought and sold mutual fund holdings at the industry's average rate, Edward Jones would have collected $8 billion more from commissions in the past decade, he said. Still, the company has been highly profitable, in large part from commissions on mutual fund sales, which make up more than a third of its revenues. According to SEC documents, the company reported revenues of $2.1 billion and a profit of $192 million for the first nine months of this year. The top 275 executives benefited the most, getting $151 million of the profit. Ankney also defended revenue sharing as a "common" industry practice. In addition, he said, the SEC had determined that it was proper to disclose the revenue-sharing agreements in mutual fund prospectuses, which Edward Jones said it did. Edward Jones "never considered its practices in this regard to be questionable or contrary to industry standards," Ankney said. But the SEC said "few of these disclosures adequately described Edward Jones' potential conflict of interest." U.S. Attorney Jim Martin, whose office last week imposed sanctions on Edward Jones, had little comment on Hill's impending departure as managing partner. "We can't really talk about an individual unless we file charges against them."

elliemae's picture
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Player wrote:
megdawg,
It appears I hit a nerve with you, stop the personal slamming, realize Jones is changed forever, and all your hoping will not change it ! 

megdawg,
If you are at Jones, then you know how much support you get from the home office where non-preferred funds are concerned.  Practically NOTHING!  The proprietary system that you use every day revolves around those 7 preferred fund families.  Suppose a client is interested in a good emerging markets fund.  Do you have an easy way to research the best funds available?  No, but you can call STL and they can easily look it up on THEIR system.  You are forced to call STL everytime you need anything related to a non-preferred fund, or you can research it on your own.  How many IR's are going to take the time and trouble to look at non-preferred funds?  How many have the time?  Just their systems or lack thereof point to a conflict of interest.
Also, since the company doesn't carry E&O insurance, what would happen if the IR recommended a non-preferred fund that later lost money resulting in a client complaint for compensation?  Would EDJ stand behind the IR and pay up, or would they step back and leave him holding the bag?
BTW- while I was an IR, I got a wire from the home office concerning 529 plans.  Some IR's in my state wanted to sell our state's 529 plan (non-preferred funds) so that the client could get a state income tax break for the contribution.  A wire came through from the home office saying that we could sell our state's plan but would get no support from STL.  We were on our own.
megdawg, you are kidding yourself if you think that EDJ is an innocent victim in all of this.  They have made it very difficult for an IR to sell anything except those preferred funds.
 

BlindedJonesIR's picture
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Joined: 2004-12-24

Well, the dust is finally starting to settle. And there is still smoke bellowing out of St Louis. The other day we had a conference call with our region. The main topic, the LP offering, not that we should be discussing anything else.
It is amazing how your life can be spun around so completly in such a short period of time. It makes me very upset to the fact that the GPs were working for their best interest and not my clients. When those letters go out, my clients will be looking to me for answers. I will be the shmuck, not Doug Hill or the other 300 GPs. This is a game of trust, when my clients question my trust, things are not good. My clients will be questionning this trust in January when they all recieve that magical letter.
Enjoy your Christmas Doug and thanks for the memories. Oh and dont let the door hit you on the way out.

zacko's picture
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Joined: 2004-12-01

Doug was such a prick. 
He had to pay 3 million himself!  That's 6 months pay. 

uwec86's picture
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Edward Jones 'sTop ExecutiveTo Step Down<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
By JOHN HECHINGER and SUSANNE CRAIG Staff Reporters of THE <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />WALL STREET JOURNALDecember 28, 2004; Page C1
Edward D. Jones & Co.'s top executive plans to give up his post next year in the wake of a settlement with federal regulators over the tens of millions of dollars in undisclosed fees the brokerage firm received from mutual-fund companies to sell their wares.
The stepping aside of Doug Hill, Jones's managing general partner, was disclosed in a Securities and Exchange Commission filing.
The move is a blow to the St. Louis-based firm, which prides itself on its squeaky clean, even folksy reputation. Last week the company agreed to pay $75 million to settle the regulatory allegations from the SEC, the National Association of Securities Dealers and New York Stock Exchange's regulatory division.
That agreement represented the largest regulatory settlement to date from a brokerage firm involving revenue sharing, an industry practice in which mutual funds pay brokerage firms to encourage them to push their product.
Edward D. Jones, which is a private partnership, also disclosed that Mr. Hill personally agreed to pay $3 million -- a "disproportionate share" of the $75 million penalty. Regulators have said the money would be distributed to investors. As a group, the general partners, including Mr. Hill, will pony up $44 million, carrying a far bigger load than the firm's limited partners, who include many brokers working in store offices across the country.
Last week, the U.S. Attorney's office for the Eastern District of Missouri, which had also been investigating Jones's revenue-sharing agreement, disclosed it had agreed not to prosecute the firm if Jones met certain conditions over the next two years, including paying the $75 million penalty and allowing customers to switch funds free of charge.
Yesterday, Jones said the agreement with the Justice Department also triggered Mr. Hill's departure as managing partner.
The filing said Mr. Hill had agreed to "voluntarily retire." The Justice Department agreement, which Jones filed yesterday, calls for a "reconstituted" executive committee.
Mr. Hill, 60 years old, will stay on as managing partner until the end of 2005, and will continue as a partner after that, according to a memo Mr. Hill sent to staff yesterday. "I agreed to this condition to clear the way for a settlement of these issues so all of us can put the dispute behind us and focus on helping our clients meet their long-term financial needs," he wrote.
Mr. Hill was named managing general partner last year and started the job in January. He took over from long-term Jones executive John Bachmann, who is credited with building the firm into a force to be reckoned with. In recent months, as the revenue-sharing scandal gripped the firm, there has been pressure on Mr. Bachmann to return, according to people familiar with the matter. However, the company requires managing general partners step down at age 65, the age Mr. Bachmann retired at, so any hopes of a return may be wishful thinking.
The firm said it plans to set up a succession committee to find a successor for Mr. Hill. Mr. Bachmann didn't return calls for comment yesterday. Mr. Hill declined through a spokeswoman to comment.
Mr. Hill now becomes one of the highest-profile casualties in the mutual-fund scandal, which has ended the careers of a number of senior executives in the fund world. He is the first head of a major Wall Street firm to step aside.
In recent years, Wall Street has been under siege by regulators who have been examining a broad range of conflicts of interests, such as tainted stock research and secret incentives between mutual funds and brokers. Mr. Hill's move shows just how far reaching the probe is. Edward Jones has long held itself out as an alternative to the conflict-ridden firms, and even took out advertisements to that effect.
Jones has nearly 10,000 sales offices nationwide, making it the largest network of brokerage outlets in the U.S. Its revenue-sharing practices were the subject of a page-one Wall Street Journal story in January 2004.
At Edward Jones , brokers were awarded points that they could apply towards stays at posh European and Caribbean resorts for selling customers mutual funds from firms that were making secret payments.
Meanwhile, the SEC filing and the memo to employees also says that two general partners are leaving the firm, human-resources chief Michael Holmes and Darryl Pope, another general partner. These departures aren't related to the regulatory settlement, the firm said. Messrs. Holmes and Pope couldn't be reached to comment.
Write to John Hechinger at john.hechinger@wsj.com and Susanne Craig at susanne.craig@wsj.com

illuminati's picture
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'Monday, Jones said the agreement with the Justice Department also triggered Mr. Hill's departure as managing partner.
The filing said Mr. Hill had agreed to "voluntarily retire."
The Justice Department agreement, which Jones filed Monday, calls for a "reconstituted" executive committee. '
Everyone should understand Mr. Hill's use of the word "voluntarily" is capricious at best.  Without the spin, he is volunteering to step down to satisfy as one of the demands by the Justice Department in order that Jones avoids prosecution. 
 

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Today's Scandal......
Regulators FindProblem TradingAt Edward Jones
Firm Acknowledges to GovernmentThat It Failed to Disclose PracticesLeading to Penalty and Shake-Up
By SUSANNE CRAIG and JOHN HECHINGER Staff Reporters of THE WALL STREET JOURNALDecember 29, 2004; Page C1
In late 2003, St. Louis brokerage house Edward D. Jones & Co. took out advertisements in newspapers across the country, shaking its finger at the "anything goes" approach that led to abuses in the mutual-fund industry. Now, the company has acknowledged to the Justice Department that it failed to disclose mutual-fund sales practices that led to a $75 million penalty from regulators and a shake-up in its executive suite.
In a Securities and Exchange Commission filing late Monday, Jones also disclosed that regulators had found thousands of instances of the firm's improperly allowing mutual-fund trades made after 4 p.m. Eastern time to receive that day's price. The practice, called late trading, is considered one of the more clear-cut and egregious abuses of the mutual-fund scandal because it can allow favored clients to skim profits from long-term investors.
Regulators didn't identify any specific instances of abusive late trading, but said Jones didn't have the proper systems in place to prevent "any unlawful late trading that may have existed." Jones settled these allegations without admitting or denying them.

The firm, which operates the largest network of retail brokerage offices in the U.S., also disclosed in the SEC filing that Doug Hill, its managing general partner, who signed the ad, is stepping down at the end of 2005 in the wake of a settlement with federal regulators over the tens of millions of dollars in undisclosed fees the firm received from mutual-fund companies to push their products.
A spokeswoman for Jones declined to comment on the filing. Yesterday, Mr. Hill's lawyer said that his client, who declined to comment, was committed to restoring the firm's image. He added that Jones never considered what it was doing to be questionable.
Federal regulators say Jones improperly encouraged its brokers to steer customers toward seven "preferred" mutual-fund companies that secretly paid the brokerage house. That practice, common in the industry, is called "revenue sharing." Jones' revenue-sharing practices were the subject of a page-one Wall Street Journal article in January 2004. Historically, 95% to 98% of Jones sales of mutual funds have been from these funds, regulators found.
Regulators believe undisclosed payments may have hurt clients because brokers had an incentive to put them into inferior or inappropriate products just to get the incentives, which included trips, with an average value of $5,000, to destinations such as Davos, Switzerland, and the British Virgin Islands. Some brokers were provided $1,000 cash for one trip billed as a "shopping spree."
The filing by Jones, a private partnership, included a laundry list of other infractions, including findings that the firm failed to preserve e-mails for at least two years as required by regulators. The filing also included the firm's agreement with the U.S. attorney's office for the Eastern District of Missouri, which had been conducting a criminal investigation of Jones and found that the firm gave inaccurate statements to the SEC in response to a so-called Wells notice. Wells notices warn that regulators may file civil charges and give firms a chance to defend themselves. As part of the agreement with the U.S. attorney, Jones acknowledged making inaccurate statements.
The documents didn't spell out those statements, but people familiar with the matter say U.S. Attorney James Martin's office took exception to Jones's vigorous defense of its revenue-sharing agreements in its Wells response. The spokeswoman for Jones declined to comment, as did Mr. Martin.
The U.S. attorney agreed he wouldn't prosecute if Jones meets certain requirements over the next two years, including paying the regulatory penalty and letting customers who own preferred funds switch to other funds free of charge.
In its settlements with the SEC, the National Association of Securities Dealers and the New York Stock Exchange, Jones neither admitted nor denied wrongdoing. Jones still faces a lawsuit by California Attorney General Bill Lockyer, who has called the regulatory settlement inadequate, given what he said were $300 million in undisclosed payments from funds since January 2000. Jones has said it will vigorously defend itself against that suit.
But in its settlement with the Justice Department, Jones acknowledged it sometimes encouraged its brokers to consider revenue sharing in advising investors on which funds to buy, among other admissions. Meanwhile, the NASD and the NYSE said Jones also failed to have policies to prevent customers from sending an order to buy mutual-fund shares after 4 p.m. and receiving a pre-4 p.m. price. Securities rules mandate orders received after 4 p.m. get the next day's price.
Investors who send in orders late but get the earlier price can exploit late, market-moving information, such as a positive announcement after 4 p.m. from a company that is a big holding in a mutual fund. Those investors can buy shares in the fund and sell the next day, reaping a profit that should belong to long-term shareholders. New York state's attorney general, Eliot Spitzer, who brought late trading to light in the fall of 2003, likened it to betting on a horse race after it was over.
Before November 2003, Jones let its brokers call its service department between 4:01 p.m. and 4:45 p.m. Eastern time and request a mutual-fund trade be allocated to that day's price, according to agreements with the NASD and NYSE contained in the new regulatory filing. To do so, brokers had to certify they received the trade from the customer before 4 p.m., the NASD and NYSE said. Jones called such requests "released trades" and let brokers, after the 4 p.m. cutoff, change amounts of trades and the names of funds bought, regulators said.
Between May 2003 and November 2003, Jones identified 8,700 instances where orders were entered, changed or cancelled after 4 p.m., and the execution price was based on that day's closing price, according to the filing.
The findings are a blow to Jones, which for years has managed to avoid any major run-ins with regulators. Jones' network of approximately 10,000 brokers caters primarily to the so-called buy and hold investor, who invests for the long term. It prides itself on its low-key, folksy image. Jones brokers often go door-to-door to recruit new clients. Many brokers hand out roses to their female clients on Valentines Day. "Investors are entitled to transparency," Mr. Hill and former Managing General Partner John Bachmann wrote in 2003 in a letter to the SEC that became the centerpiece of the firm's ad. "They should know what they are paying, and what we, as the broker, are receiving."
Mr. Hill, 60 years old, will step down as managing general partner at the end of 2005 as part of the agreement with the Justice Department and will remain a partner, a memo he sent to staff Monday. Jones also disclosed that Mr. Hill personally agreed to pay $3 million -- a "disproportionate share" of the $75 million penalty. Regulators have said the money would be distributed to investors. As a group, the general partners, including Mr. Hill, will pony up $44 million, carrying a far bigger load than the firm's limited partners, who include many brokers working in store offices across the country.

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Deal explains brokerage exec's fate<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
By Jack Naudi
Of the Post-Dispatch
12/28/2004
 
Tucked in the middle of a nine-page agreement between Edward Jones and U.S. Attorney Jim Martin is language that in part helps explain the departure of Douglas Hill as Jones' top executive. The Des Peres-based brokerage announced Monday that Hill will give up his position as managing partner on Dec. 31 of next year. The announcement came less than a week after the Securities and Exchange Commission penalized Jones $75 million for failing to disclose to investors that seven mutual fund companies paid to get on its "preferred" list. The agreement between Edward Jones and Martin, announced Dec. 20, requires the firm to hire an "independent employee" who'll work to keep it out of trouble. That person will report to a "reconstituted executive committee," according to the agreement. Hill is one of six people on the firm's executive committee, which helps set Jones's policies. Martin and Edward Jones sources say the makeup of the committee has yet to be determined, but Martin said members must be free of conflicts. That excludes Hill, who's tied closely to the mutual fund problems. On Monday, Edward Jones said two other members of the executive committee - the youngest and the oldest members - will leave the firm on Friday. But Jones said both are leaving for reasons unrelated to the mutual fund problems. Darryl Pope, one of 275 general partners, is 65, the company's mandatory retirement age for partners. Michael Holmes, 46, who headed the firm's human-resources department, will "pursue his interests in providing consulting services to not-for-profit institutions," the company said. Neither man would comment. The retirements of Holmes and Pope were announced internally at least a month ago, said an Edward Jones spokeswoman. "There was nothing unusual," said Mary Beth Heying of Edward Jones. "We have partners who retire all the time. ... There is no connection to those (mutual fund) events." Of more urgency to many investors are other components of Edward Jones' agreement with the <?:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />U.S. attorney. One allows customers to move from one of the seven preferred mutual fund families to any other fund without paying commissions and fees. Edward Jones will contact customers in writing about the plan, Heying said. Once customers receive the notice, they'll have 90 days to make the switch. Heying also said that on Jan. 6, Edward Jones will comply with another sanction imposed by the U.S. attorney and the SEC. On that date, the brokerage will fully disclose its mutual fund arrangements on its Web site, including the level of payments received from the seven preferred companies. The California attorney general, who last week filed suit against Edward Jones over the mutual fund matter, pegged the total payments at $300 million. In a filing with the SEC, the firm said it received $89.9 million in 2003 and $85.9 million in 2002. Finally, Edward Jones has until March 22 to devise an acceptable plan to distribute the $75 million required by the SEC. According to the SEC settlement, the funds will be paid to Edward Jones investors.

illuminati's picture
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Regulators Find Trading Abuses at Edward JonesSmartmoney.com
In late 2003, St. Louis brokerage house Edward D. Jones & Co. took out advertisements in newspapers across the country, shaking its finger at the "anything goes" approach that led to abuses in the mutual-fund industry. Now, the company has acknowledged to the Justice Department that it failed to disclose mutual-fund sales practices that led to a $75 million penalty from regulators and a shake-up in its executive suite, Wednesday's Wall Street Journal reported.
In a Securities and Exchange Commission filing late Monday, Jones also disclosed that regulators had found thousands of instances of the firm's improperly allowing mutual-fund trades made after 4 p.m. Eastern time to receive that day's price. The practice, called late trading, is considered one of the more clear-cut and egregious abuses of the mutual-fund scandal because it can allow favored clients to skim profits from long-term investors.
Regulators didn't identify any specific instances of abusive late trading, but said Jones didn't have the proper systems in place to prevent "any unlawful late trading that may have existed." Jones settled these allegations without admitting or denying them.
The firm, which operates the largest network of retail brokerage offices in the U.S., also disclosed in the SEC filing that Doug Hill, its managing general partner, who signed the ad, is stepping down at the end of 2005 in the wake of a settlement with federal regulators over the tens of millions of dollars in undisclosed fees the firm received from mutual-fund companies to push their products.
A spokeswoman for Jones declined to comment on the filing. Tuesday, Mr. Hill's lawyer said that his client, who declined to comment, was committed to restoring the firm's image. He added that Jones never considered what it was doing to be questionable.
Federal regulators say Jones improperly encouraged its brokers to steer customers toward seven "preferred" mutual-fund companies that secretly paid the brokerage house. That practice, common in the industry, is called "revenue sharing." Jones' revenue-sharing practices were the subject of a page-one Wall Street Journal article in January 2004. Historically, 95% to 98% of Jones sales of mutual funds have been from these funds, regulators found.
Wall Street Journal Staff Reporters Susanne Craig and John Hechinger contributed to this report.

(END) Dow Jones Newswires

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Edward Jones case shows right, wrong aren't black, whiteBy
Of the Post-Dispatch
12/29/2004
 
Edward Jones has long enjoyed an image of being a down-home, folksy sort of brokerage house. With its storefront offices and its requirement that brokers knock on doors to get to know the neighbors, it has largely appealed to the unsophisticated investor. Its brokers are not known for chasing the latest high-flying stocks. Instead, investors are steered into calmer waters - mutual funds. Now those waters have turned out to be treacherous, especially for the brokerage. Last week, the company agreed to pay $75 million in a settlement with the Securities and Exchange Commission. The settlement had to do with fees the brokerage received from mutual fund companies. On Monday, Douglas Hill, the company's top executive, announced that he would be stepping down at the end of next year, apparently as part of the settlement. Not coincidentally, the settlement forestalled possible prosecution of the company by the U.S. attorney's office. That happens to be a very big stick. If the company were to be indicted, its license to sell stock could be suspended. Even as things stand now, the waters ahead are rough. Lawsuits are pending. The company's reputation has been tarnished. And here is the surprising thing: What the company is accused of doing - taking money from the mutual funds it sells - is not illegal. What in the heck is going on? I asked a friend who understands this stuff. You have to first separate the financial world from the legal world, he explained. The legal world is black and white. Guilty or not guilty. The financial world is gray. The mutual funds kick back to the brokerage but call it revenue sharing. It's legal. But is it ethical? You start to get into shades of gray. There are billions of dollars in mutual funds. A little bit of the money sticks to anybody who comes in contact with the funds. Sadly, sometimes greed takes over. Consider the late-trading schemes of a couple of years ago. It's all kind of complicated, my friend said, but hedge funds were making trades after the market closed, and thus profiting on after-hour news. In essence, they were ripping off the mutual funds - the investors - and how did some of the mutual funds react? They started their own hedge funds so they could participate. The odd thing about this - and it seems to be true with so many financial scandals - is that most of the people didn't really need the money. One of the biggest hedge funds in this scandal was Canary Capital run by Edward Stern, son of billionaire Leonard Stern for whom the business school at NYU is named. By the way, Edward Stern cooperated with the government and he and his company paid a fine of $40 million. He was not prosecuted. There was also a market-timing scandal, my friend said. Market timing is not illegal. But it is a matter of degree, he said. That brings us to Edward Jones. Revenue sharing is not illegal. It is not secret. That is, the government knows about it. But again, we're talking about a matter of degree. What if it begins to appear that revenue sharing is driving your business? What if your clients are unaware of the financial relationship you have with the funds you keep recommending? In the eyes of some folks, the gray becomes increasingly dark. At some point, it seems that business becomes more art than science and knowledge of the law becomes less important than a sense of right and wrong. There were folks at Edward Jones who got it. One of the civil suits going forward against the brokerage cites internal e-mails in which employees criticized the company's policies. In one of the e-mails, an employee worried that the brokers were getting rewarded for steering investors to a small group of funds, including some that did not have good performance records. "There is something dirty about the mutual fund business that has been developing over the last 5 years," the employee wrote. I do not know the identity of the employee who wrote that e-mail. But if I were running Edward Jones right now, I'd find out. When the gray starts pushing black, you need somebody who will notice the change.
 

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WHAT LEVEL OF EGREGIOUS BEHAVIOR MUST EXIST TO INCITE THE SEC AND JUSTICE DEPARTMENT TO DEMAND REMOVAL OF A COMPANY'S LEADERSHIP??
ANSWER: WHEN THE NATURE OF THAT LEADERSHIP IS CLEARLY IN CONFLICT WITH THE PUBLIC INTEREST. 
In the days to follow, when other firms are being fined, keep this in mind:  When it becomes easy to claim this is happening to everyone, ask why it was Edward Jones that was required to have it's Managing Partner step down, AND its "Executive Committee Re-constituted".
 
 

LA,P-ALL's picture
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Illuminat / Zacko / other former ex-Jones IR's,
You cannot possibly imagine the amount of brainwashing going on within EDJ.  The average IR I know is incensed at the gall of the WSJ and Post Dispatch printing such nonsense.  "It is legal, it will pass, it's all good, not to worry".  Been here eight years.  What gives?  Are they brainwashed or playing it close to the vest?

Jonestown's picture
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You might be an idiot if.......
You became a General Partner in the last 5 years..... what an honor, and you paid to get it! I guess opening those offices in your town, hiring your future competition, giving away your clients, looks pretty stupid right now.....hope you didn't get divorced too! 

uwec86's picture
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I wonder how much a RL will have to pay of the fine if he just got his $125k of GP in the last year or year and a half?

xej1984's picture
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Hey where's that weasel that claimed these investigations by the SEC were going to be dropped .... yeah right   
Edward Jones' sales contest irked regulatorsInsufficient supervision to combat late fund trades also cited

By Kathie O'Donnell, CBS MarketWatchLast Update: 5:55 PM ET Dec. 29, 2004 NEW YORK (CBS.MW) - The $75 million regulatory settlement Edward D. Jones agreed to last week also involved allegations that the firm lacked adequate policies to prevent late trading of mutual fund shares and ran an unlawful sales contest which offered brokers trips to "world class" vacation spots, the National Association of Securities Dealers said.
"The NASD has brought a number of actions in the mutual fund area, and this action is a continuation of this focus," Katherine Malfa, vice president of enforcement at NASD, said Wednesday.
On Dec. 22, brokerage Edward Jones reached final settlements with the Securities and Exchange Commission, the NASD and the New York Stock Exchange tied to charges that it failed to adequately disclose revenue-sharing payments it received from mutual fund families and 529 savings plans, also known as college savings plans, it recommended to customers.
The NASD and the NYSE, which are self-regulatory organizations, also charged the firm with violating their rules by lacking adequate supervisory practices to combat late trading, Malfa said in a telephone interview.
Both organizations also charged Edward Jones with failure to retain emails, she said. In addition, the NASD brought charges for conducting the illegal sales contest and for violating one of its rules that prohibits firms from favoring the sale of specific funds in return for brokerage commissions, Malfa said.
Edward Jones agreed to the settlement without admitting or denying guilt. In a regulatory filing on Monday, the St. Louis, Mo.-based firm also said Douglas Hill, managing general partner, had agreed to retire voluntarily at the end of 2005.
Late trading, which is illegal, occurs when people are allowed to buy mutual fund shares at the current day's net asset value after the 4 p.m. EST close of trading. Federal securities laws require mutual fund transactions received after 4 p.m. to be given the next day's NAV. In late trading, traders may seek to profit from market events occurring after 4 p.m. that aren't reflected in that day's price.
Edward Jones said in the filing that prior to Nov. 30, 2003, between 4:01 p.m. and 4:45 p.m., the firm allowed investment representatives to call the Service Division at its headquarters to request that a trade entered after 4 p.m. be "released" and given the same day's NAV. Between May and November 2003, the firm identified about 8,700 instances where an order was entered, changed or cancelled after 4 p.m. and given that day's NAV.
Typically, the only question the service representative posed to the investment rep was whether the order was received prior to 4 p.m. Once the rep answered yes, the trade was released at that day's NAV, the filing said.
The NASD found that in those instances, the firm didn't have policies or procedures in place to verify that customers actually placed those orders before the 4 p.m. close, Malfa said.
In addition to "released" trades, the firm also permitted trade corrections, the filing said. If a trade entered into the firm's computer system before 4 p.m. had administrative errors, an investment rep was allowed to correct it after the fact, changing among other things the quantity and fund name of the trade without prior supervisory approval. The corrections, however, were listed on reports to supervisors, the filing said.
The NASD said its charge concerning the unlawful sales contest relates to a contest held in Fall 2002. Winning brokers could pick from 35 vacation spots such as Singapore, St. Martin, Davos, Biarritz and Tortola. The contests, held every six months, rewarded winners with airfare and five-star accommodations, as well as with activities such as skiing and golfing.
In October 2002, Edward Jones altered the rules, only crediting sales of fund shares from its preferred list. That violated NASD rules which prohibit product-specific sales contests that credit the sale of some, but not all, fund sales. According to an NASD release issued last week, some brokers complained that "doing the right thing" for clients by recommending non-preferred funds and variable annuities hurt their chance to earn a sales contest trip.
Edward Jones spokeswoman Katie Schonaerts said the firm had no comment beyond the filing.

Kathie O'Donnell is a CBS MarketWatch reporter based in Boston.

illuminati's picture
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LA,P-ALL wrote:
Illuminat / Zacko / other former ex-Jones IR's,
You cannot possibly imagine the amount of brainwashing going on within EDJ.  The average IR I know is incensed at the gall of the WSJ and Post Dispatch printing such nonsense.  "It is legal, it will pass, it's all good, not to worry".  Been here eight years.  What gives?  Are they brainwashed or playing it close to the vest?

'Playing it close to the vest' would suggest that "they have other cards to play yet".  I would suspect that not only are there no other useful cards to play, but that they (Jones) are not even sure which game they are playing.
The S.O.P., by default, will include running the propoganda machine. The "brainwashing" TODAY is just music to calm the masses:
The music was cheerful and gay. The selections were mostly ragtime and gave the impression to the passengers on deck that all was under control, there was no need to panic. Many of the survivors expressed their gratitude to the Titanic band for helping to maintain an air of decorum during the scramble for the lifeboats. Others have criticized the band for playing. Some felt that having the band on deck gave people a false impression that things weren't that bad and it caused many to take the situation lightly, thus preventing many from entering the life boats. This argument is left to conjecture, but what is known is that the band's music did help to soothe the passengers and most likely prevented panic as the last of the boats were leaving.
At 2:00 A.M. the last boat, Collapsible D, left the ship. It was now 2:05 A.M. more than 1,500 people were still aboard. The Titanic sank lower and lower at the bow, and stern began to rise out of the water. There was little time now. The band continued to play. The deck became so steep that bandmaster Hartley released the musicians from duty. Alone, he began the first notes of a simple hymn. One by one the bandsmen, choosing not to leave joined in. It was the last song the band would play and the last song survivors heard before the boat broke into two pieces. Minutes later the entire band was washed away by a sudden wave as the Titanic made it's last plunge.
  
 

Player's picture
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Edward Jones IR's are in shock
I heard from an old IR friend in California, he said their phones are ringing off the hook, clients wanting to know when and how they can get their money back on their lousy Mutual Funds The calls are non stop !
But the brainwashing is really going on to the extreme, I talked to another IR that told me " here is no way California is going to cost Jones a penny " I asked him if the same GP that told him the SEC would never fine Jones for doing the right thing, oh, he's the one that got fined 3 Million and had to resign........................ 
It is really amazing how intelligent people can be duped over and over............That Kool Aid must be getting stronger than ever

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Being an IR at Jones, for the moment, it is indeed a very strange time. For the record, I have been with Jones for 8 years and I am finishing up the year at the 300K level. When I started with Jones, I came out swinging. My numbers were way above the standard and I was praised by my peers (cherry flavored). It was an honor to be asked to mentor new IRs (grape) or to lead the call out sessions (lemonade), or to become the growth leader (Fruit Punch) and to become the New Hire Specialist (Berry). I did all of this for free and my business suffered.

Today, there are two distinctive camps. The "I cant believe they can do this to us" camp and the other "I can't believe they can do this camp". They being, the GPs and the other being the Press.

Today, my Kool Aid cup is empty and as I look around, I have nothing to show for it. My book is not mine and I am constantly monitering the news before work in order to see what traps lie awaiting me prior to arriving at work.

I am not getting many calls......yet. The ones who are calling are feeling bad for me for working for such scoundrels. Greed is a terrible thing. It tends to lead to unethical behavior.

So if you are in the "Jones is the best place to be camp", please hand me a new cup of Kool Aid. I may not drink it, but at this point, we are picking up camp and closing this chapter.

You have three months to change my mind.

"Honey, get the kids clothes on, we're getting ready to leave."

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Thought I would take a look at the Edward Jones website to see if there was any mention of their current travails.  No mention, but it was enlightening to read.  For example:
1.  Under the "How Others See Us" tab there is copious recitation of media citations about the nice things said about Jones.  No mention about what the SEC, NYSE, NASD, California AG or the thousands of mislead clients had to say.
2.  Under "Comprehensive Resources" the following is stated.  "We offer the broadest selection of high-quality stocks, bonds, mutual funds, CDs, insurance/annuities..."  The word offer should be changed to "we can get you if you really, really demand".
3.  Under "A Commitment to Quality" I learned that in 1987 Edward Jones established an Investment Policy Advisory Committee made up of 15 "experts".  The Co-Chairman of this Committee is Anthony Kreisel, Former Managing Director of Putnam Funds. Enough said!!!!
4.  Finally, there is a tab titled "In The News".  There was not a single mention of any problems or potential problems.  I guess the webmaster doesn't subscribe to the Wall Stree Journal, Forbes, Investors Business Daily, the St. Louis Post Dispatch or any of the other financial publications that have been exposing Jones.  I believe this omission should be construed as failure to provide full and fair disclosure.
Bottom Line.  Edward Jones has learned nothing from this.  The fine was too inconsequential to get their attention.  They are viewing this as a short-term public relations problem that will go away, allowing the GPs to return to some new scheme for fleecing investors. 
For the clones and drones that are too young to remember the past, allow me to recite for you the hit parade of investment failures that Jones swept under the rug in the early 80s:
1.  Petro Lewis
2.  Gambles Skogmo
3.  NRM
4.  EMC
5.  Famland
6. University SPDA
7. Winchester Oil
8.  McNeil Real Estate
9.  Angeles Real Estate
These were very real, catastrophic losses to conservative clients that merely represented a speed bump to the GPs.  Let's hope that the California AG and the pending class action suits bring a real aspect of justice to Jones.

Not1ofthem's picture
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The California AG will have a very small effect.  He keeps using national numbers to tell a local audience about a CA settlement.  Let's assume that his 300 million figure is right.  Let's even go so far as to assume that 5 percent of that were in the state of California.  That would only be 15 million tops, and quite frankly it is doubtful they will get that much.  (The 5 percent figure is probably exaggerated as I think Jones is not as big a presence in California.)
So the most damages they could claim would be 15 million and in settlement talks, that will probably dip to 5 million. 
Sure, other states could follow suit, but I seriously doubt they will once they see how little the money will be for CA.

xej1984's picture
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not1,
review the following and then comment
http://www.hoovers.com/jones-financial-companies/--ID__40868 ,ipage__3164579--/free-co-secoutline.xhtml
 

Starka's picture
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Phuck 'em.  Who cares what happens to Edward Jones?
 

megdawg's picture
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"I just finished my eighth year at Jones at 300k gross." "My business suffers because I do everything." You're an underachiever. Perhaps if you stayed off internet chat rooms and worked the Tuesday Night Promo's you wouldn't be so bitter about your low production.
You people on this chat room are obviously frustrated at not making it at Jones. They aren't for everybody and the proof is in this forum.
I drink the Kool-Aid every day. It tastes great and I will be taking a large amount of it with me on the diversification trip to the exotic island Turks & Caicos paid for by Edward Jones.
Aloha, baby!!!
 

elliemae's picture
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Anybody heard when EJ clients are going to be able to switch funds at NAV?
I know some EDJ clients that want to transfer to me, but maybe they should hold off and do the switch before transferring over

elliemae's picture
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xej1984 wrote:
not1,
review the following and then comment
http://www.hoovers.com/jones-financial-companies/--ID__40868 ,ipage__3164579--/free-co-secoutline.xhtml
 

"He (the Director of Mutual Funds Marketing) also represented to the IRs that Edward Jones directly passes the revenue sharing income along to the "IRs who did the work to get the money in the first place."
It sounds like revenue sharing income was being passed down to the worker bees.  I don't think so!  In III.8, the breakdown shows revenue sharing only going to partners.
 

elliemae's picture
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megdawg wrote:
They aren't for everybody and the proof is in this forum.

megdawg,
You are right.  EDJ wasn't for me, for all of the reasons outlined in the SEC ruling.

megdawg's picture
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Joined: 2004-12-23

Learn to read Elliemae. If you worked at Jones you will know that revenue sharing is credited to the P&L. Seperate your emotions and get it straight. You're sounding like another underachieving former IR that didn't make it.  

megdawg's picture
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Joined: 2004-12-23

Elliemae. That's a cop out. You failed, plain and simple.

Starka's picture
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megdawg wrote:Elliemae. That's a cop out. You failed, plain and simple.
The hubris of the ignorant.
Congratulations, mega!

megdawg's picture
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No Starka. The facts from the one who knows.

Starka's picture
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megdawg wrote:No Starka. The facts from the one who knows.
Your firm is the laughingstock of the industry meg and so, apparently, are you.

megdawg's picture
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Joined: 2004-12-23

Starka. Your reply is typical from someone that is uninformed and knows it. How sad.
 

elliemae's picture
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Joined: 2004-11-30

megdawg wrote:Elliemae. That's a cop out. You failed, plain and simple.
Hey meg,
Maybe you know the answer to my previous question:
Anybody heard when EJ clients are going to be able to switch funds at NAV?
I know some EDJ clients that want to transfer to me, but maybe they should hold off and do the switch before transferring over
Can they do the switch now, so I can go ahead and get those accounts moved 

Starka's picture
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megdawg wrote:
Starka. Your reply is typical from someone that is uninformed and knows it. How sad.
Meg, save your tears for someone who cares.

megdawg's picture
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Joined: 2004-12-23

Elliemae,
I seriously doubt that Jones clients want to move to you. Further proof that you didn't actually read the statement is in your previous post. Read the settlement.

megdawg's picture
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Starka, your intellect is overwhelming.

Starka's picture
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megdawg wrote:Starka, your intellect is overwhelming.
To another intellectual, it is. 

elliemae's picture
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megdawg wrote:
Elliemae,
I seriously doubt that Jones clients want to move to you. Further proof that you didn't actually read the statement is in your previous post. Read the settlement.

Please read:
 DEFERRED CONSIDERATION AGREEMENT         On December 20, 2004, Edward Jones entered into a DeferredConsideration Agreement (a copy of which is attached as Exhibit 99.4, andwhich is incorporated herein by reference) with the United States Attorney'sOffice for the Eastern District of Missouri ("Office"). Pursuant to theDeferred Consideration Agreement Edward Jones has agreed, in addition to theSEC administrative order, the NASD Letter of Acceptance, Waiver and Consent,and the NYSE Stipulation of Facts and Consent to Penalty described above(collectively, the "Order and Agreements"), to offer its customers holdingshares in Preferred Funds (as described in the Deferred ConsiderationAgreement) for a period of ninety (90) days, the opportunity to sell suchholdings without the payment of certain fees by selling the customer'sinterest in the Preferred Funds, at net asset value, to purchase shares ofmutual funds in another Preferred Fund or any other mutual fund with whichEdward Jones has a selling agreement ("Switch Funds"). For this purpose,commissions typically paid to Edward Jones and the Switch Funds will bewaived by Edward Jones and the Switch Funds or Edward Jones will passthrough the commissions received by Edward Jones and the Switch Funds backto the customer. Edward Jones further agreed to allocate responsibility forthe payment of the amount due under the Order and Agreements among theregistrant's partners (except registrant's limited partners), in a mannersatisfactory to the Office, and to reimburse the United States PostalService for its investigation costs and expenses in the amount of $200,000as directed by the Office.You can find that here:
http://www.hoovers.com/free/co/secdoc.xhtml?ipage=3164579&am p;doc=0&attach=on

xej1984's picture
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megdawg chew on this bone ......    
 
Deal explains brokerage exec's fate
By Jack Naudi
Of the Post-Dispatch
12/28/2004

Douglas Hill, current Chief Operating Officer for Edward Jones(Andrea Scott/P-D)

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Tucked in the middle of a nine-page agreement between Edward Jones and U.S. Attorney Jim Martin is language that in part helps explain the departure of Douglas Hill as Jones' top executive. The Des Peres-based brokerage announced Monday that Hill will give up his position as managing partner on Dec. 31 of next year. The announcement came less than a week after the Securities and Exchange Commission penalized Jones $75 million for failing to disclose to investors that seven mutual fund companies paid to get on its "preferred" list. The agreement between Edward Jones and Martin, announced Dec. 20, requires the firm to hire an "independent employee" who'll work to keep it out of trouble. That person will report to a "reconstituted executive committee," according to the agreement. Hill is one of six people on the firm's executive committee, which helps set Jones's policies. Martin and Edward Jones sources say the makeup of the committee has yet to be determined, but Martin said members must be free of conflicts. That excludes Hill, who's tied closely to the mutual fund problems. On Monday, Edward Jones said two other members of the executive committee - the youngest and the oldest members - will leave the firm on Friday. But Jones said both are leaving for reasons unrelated to the mutual fund problems. Darryl Pope, one of 275 general partners, is 65, the company's mandatory retirement age for partners. Michael Holmes, 46, who headed the firm's human-resources department, will "pursue his interests in providing consulting services to not-for-profit institutions," the company said. Neither man would comment. The retirements of Holmes and Pope were announced internally at least a month ago, said an Edward Jones spokeswoman. "There was nothing unusual," said Mary Beth Heying of Edward Jones. "We have partners who retire all the time. ... There is no connection to those (mutual fund) events." Of more urgency to many investors are other components of Edward Jones' agreement with the U.S. attorney. One allows customers to move from one of the seven preferred mutual fund families to any other fund without paying commissions and fees. Edward Jones will contact customers in writing about the plan, Heying said. Once customers receive the notice, they'll have 90 days to make the switch. Heying also said that on Jan. 6, Edward Jones will comply with another sanction imposed by the U.S. attorney and the SEC. On that date, the brokerage will fully disclose its mutual fund arrangements on its Web site, including the level of payments received from the seven preferred companies. The California attorney general, who last week filed suit against Edward Jones over the mutual fund matter, pegged the total payments at $300 million. In a filing with the SEC, the firm said it received $89.9 million in 2003 and $85.9 million in 2002. Finally, Edward Jones has until March 22 to devise an acceptable plan to distribute the $75 million required by the SEC. According to the SEC settlement, the funds will be paid to Edward Jones investors. Who made payments The mutual fund groups that made the payments to Edward D. Jones & Co. that weren't disclosed were: American Funds Putnam Funds Van Kampen Funds Lord Abbett Funds Hartford Mutual Funds Goldman Sachs Funds Federated Mutual Funds Reporter Jack Naudi E-mail: eval(unescape('%64%6f%63%75%6d%65%6e%74%2e%77%72%69%74%65%28%27%3c%61%20%68%72%65%66%3d%22%6d%61%69%6c%74%6f%3a%6a%6e%61%75%64%69%40%70%6f%73%74%2d%64%69%73%70%61%74%63%68%2e%63%6f%6d%22%3e%6a%6e%61%75%64%69%40%70%6f%73%74%2d%64%69%73%70%61%74%63%68%2e%63%6f%6d%3c%2f%61%3e%27%29%3b')) Phone: 314-340-8223

elliemae's picture
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xej1984 wrote:

Of more urgency to many investors are other components of Edward Jones' agreement with the U.S. attorney. One allows customers to move from one of the seven preferred mutual fund families to any other fund without paying commissions and fees. Edward Jones will contact customers in writing about the plan, Heying said. Once customers receive the notice, they'll have 90 days to make the switch.
xej-
I haven't seen anything about when EDJ has to send those letters out.  Have you? 

megdawg's picture
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xej
Show me what was illegal? Where do you work now? Give me an example of a client that bought American Funds from me in the last 10 years got hurt. Read the article in yesterday's St. Louis Post-Dispatch and broaden your horizons. The article above is old news.

elliemae's picture
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I'd like to get those folks into Am Funds at no cost before I steal their accounts.

Starka's picture
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Steal the accounts, Ellie?  You're doing the poor bastards a favor.

Starka's picture
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megdawg wrote:
xej
Show me what was illegal? Where do you work now? Give me an example of a client that bought American Funds from me in the last 10 years got hurt. Read the article in yesterday's St. Louis Post-Dispatch and broaden your horizons. The article above is old news.

Failure to disclose is a violation.  Or didn't they tell you that?

elliemae's picture
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Starka wrote:Steal the accounts, Ellie?  You're doing the poor bastards a favor.
I'd like to get some of those EDJ clients into Am Funds at no cost before I do them a favor and steal their accounts from EDJ. 

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