Jones Pays
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Truth,
You’re comments are off-base. First, I’ll claim am I not an expert in the investment industry. However, being involved in the industry for about a dozen years, interacting with all levels of my firm’s leadership in all divisions, attending dozens of industry conferences and interaction with other firm’s employees and representatives, I have a good insight of what happens in the industry and my firm. To simply dismiss my opinion as unknowledgeable is ridiculous.
Second, if you’ve actually read my posts I have not defended EJ or the current leadership within the organization in relation to what happened; there is no ‘toeing the line’. My exact quotes were,
" By and large, due to arrogance and bad decision making by the GPs EJ is in a pickle… I do believe there should be drastic changes at the GP level, though."
OR
"Jones isn’t going anywhere unless the GPs can make a killing (more than they do today) or Doug’s attorney continues to make statements to the press about this mess."
Please read my posts rather than skimming them and jumping to an invalid conclusion.
Third, rumors of EJs ‘buyout’ have been reported for years. The questions about our ability to serve in the industry have circulated for sometime. Comments about not offering online trading and be involved in high profile IPOs had other ‘experts’ questioning our business strategy. Yet we’ve managed to grow at a time when other firms have shrank through layoffs, buyouts or customer abanodment. EJ has always been a small fish in a big pond, that’s nothing new. The reality is the firm has persevered. This current event will be the test to see if we can survive this scandal. Let’s keep perspective, truth.
By the way, Merlot and Shiraz taste much better than kool-aid.
Joedog
[quote=The Truth]
JOEDOG-
Let me give you some help. Before you comment on anthing that is going on, please go work for another firm and it will help shape any future comments you make. All you are reciting is the company line and you have to realize that your bosses are greedy croooks. Plain and simple. It is obvious you don’t know much about this industry when you talk about the “Finances” at Jones. Your company is a small fish in a very large pond and that pond will be shrinking in the near future. Can they survive? Economies of scale indicate they cannot.
[/quote]
Haven't you genius's figured out who the brilliant one was.
John B. presided over this mess for years, retired before the mandatory age and will keep his reputation and millions.
Hill was set up for the fall.
Some of us IR’s think Hill was set to be the fall guy from the beginning since he was so close to mandatory retirement age. Thoughts?
I think Doug Hill got the job because he came up with the rev. sharing scheme in the first place. That’s a total guess but it is strange that he is paying 3 mil. on his own…I’m sure he was a hero when he came up with the idea.
You are making the assumption that Hill is smart enough to come up with this idea?
I agree with Beach. Bachman is sly enough to set dumb cowboy bill up. Cowboy bill took the bait.
Hill is paying 3 mil because he was the architect of revenue sharing. Trust me. Also, look at the comments of his attorney to confirm this..he is trying to justify forgoing 8 bil in potential commissions for the rev sharing. Granted Hill will be repaid from the firm as time goes on for being the fall guy,but the regulators wanted him out immediately. It took a 12 hour call w/ the SEC to allow Jones the necessary time to find a replacement.
I drank, am drinking, & will drink the kool aid, but Jones Management screwed up. This is & was a conflict of interest. I don't believe that it was a conflict of interest at the broker level. But, the numbers don't lie. When 95% of your fund biz goes to firms that pay you some kind of additional income, then something isn't right from a structural standpoint. It exists everywhere, but the 95% & the full page ad make Jones the poster boy.
Hill deserves what he's getting. In pursuing the leverage of rev sharing, the lawyers also should have pursued a higher level of disclosure.
beachbum,
Doug was there at the beginning of Rev. Shr....he just wasn't running the company...I think to was the mastermind...he's a numbers guy.
Some of us IR’s think Hill was set to be the fall guy from the beginning since he was so close to mandatory retirement age. Thoughts?
EJNew,
I thought it was an odd pick myself, but in any relationship there is the 'transitional girl/boyfriend' - the one in-between long-term relationships. When Hill was annointed with 1/2 the divisions a few years ago the writing was on the wall. Any 'qualified' GPs were already long in the tooth. There was a lack of depth in the next generation of top leadership. Hill was transitional MP until the next long term MP could be groomed. His shortened stay unfortunately changes plans as there are few in a position to take over. Holmes was not on the list because 1) he's not homegrown and 2) he was never an IR. Qualifier #1 - to be the MP you need to have been an IR. Ted Jones, JB and DH all were IRs.
It will be interesting to see how the 'executive committee' decides who its going to be. Maybe EJ could leverage this for a new reality TV show!
Joedog
Doug Hill will gladly pay the $3M and be thankful that the SEC and NASD didn't decide to get rid of revenue sharing altogether. He'll have his money back in no time.
If JB was still in place, DH would still have been the fall guy. As COO he was running this part of the show and then he could not make the transition that he needed to make to be an effective MP.
Edward Jones taps Greensfelder attorneys
Embattled St. Louis investment firm, Edward Jones, has added a large Washington, D.C. law firm to its arsenal to handle federal regulatory agencies questioning the company's mutual fund investment practices.
Jones hired Wilmer Cutler Pickering Hale and Dorr to represent the firm with the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE).
Locally, Jones continues to employ Greensfelder, Hemker & Gale to deal with an investigation by the U.S. attorney's office for the Eastern District of Missouri, multiple class action lawsuits, and a lawsuit filed by the California attorney general's office. Greensfelder has represented Edward Jones in securities arbitration and other matters for years.
Several attorneys at Greensfelder, including white collar crime and regulatory compliance attorneys Jeff Demerath and Richard Greenberg and litigation practice manager David Harris, have been representing Jones in various actions in 2004.
Early this year, the SEC and the NASD began looking into Edward Jones' mutual fund sales practices, including the practice of revenue sharing with select mutual fund families. News stories about the issue spurred the filing of several class action lawsuits.
On Dec. 20, Edward Jones, without admitting or denying wrongdoing, agreed to pay $75 million as part of a settlement agreement with the SEC, the NASD and NYSE, and Managing Partner Doug Hill agreed to pay $3 million of the settlement and step down from leading the firm at the end of 2005.
The settlement with regulators came on the same day that California Attorney General Bill Lockyer filed a securities fraud lawsuit against the firm, alleging it defrauded customers by failing to disclose the revenue sharing arrangements it had with seven mutual funds.
Harris, who has been defending Edward Jones in the class action lawsuits, may be taking on the California case as well. Harris declined to speak about his role representing Edward Jones, citing a request from the brokerage. But according to the Greensfelder Web site, he often represents large brokerage houses in securities class actions and arbitrations.
Nine class action lawsuits were filed against Edward Jones and its executive committee between January and March 2004, according to SEC filings. Five were filed in federal court in St. Louis, with the rest filed in either Los Angeles or New York.
Demerath and Greenberg are no strangers to federal regulatory issues. Demerath, who recently represented former Charter Communications executive David Barford in a federal case involving inflated subscriber numbers, is a former assistant U.S. attorney. Three other former Charter executives were indicted in the case. Charter, as a company, was not charged with wrongdoing.
Greenberg was a trial attorney, then an assistant director, in the civil division of the U.S. Justice Department in the 1980s. Demerath declined to speak about his role representing Edward Jones, also citing a request from the brokerage firm. Greenberg did not return a phone call.
Hill, meanwhile, is represented by Gordon Ankney, an attorney with Thompson Coburn, one of a team of attorneys that represented Charter at the time the four executives were indicted.
Ankney did not return several phone calls seeking comment.
St. Louis lawyers on the plaintiffs' side include Robert Blitz, a partner with St. Louis law firm Blitz, Bardgett & Deutsch. Blitz was one of the attorneys who filed a class action lawsuit on behalf of numerous Edward Jones customers in January 2004.
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A lot of us were surprised by Doug Hill becoming MP. The explanation given by Joedog is as good as any I have heard. Nobody in my region had any explanation at all.
To me, that full page WSJ ad served as the triggering event. It was a company standing up, waving it's arms, challenging an industry to take them down. In fact it was down right cocky. Uwec would be the one to ask, but I would think that ad alone would have provoked ex-brokers to contact the WSJ and blow the whistle.
I know of no one in my old region who thought the ad was a good idea. In times of trouble, you keep your head down and go to work. You don't point fingers and draw attention to yourself.
How about:
EJ = Effluent Jurisprudence (where history remembers EJ as "just desserts"?)
EJ = Exponentially Jacked (LPs get ripped off at order of magnitude)
EJ = Effectively Jones'd (New GPs)
EJ = Efficiently Juiced (Old GPs)
EJ = Enourmous Joke (self-explanatory)
EJ = Egregiously Jostled (whereas jostle is the old-world description of "to pick pockets")
OH, I COULD GO ON.....
Can Edward Jones keep taking money from mutual fund firms?
By David Nicklaus
Of the Post-Dispatch
Wednesday, Jan. 05 2005
Legally, Edward Jones' settlement with the Securities and Exchange Commission
and the U.S. attorney's office is about disclosure. It didn't tell investors
clearly enough that the firm and its brokers had a financial incentive to push
certain mutual funds instead of others.
The settlement is clear about some things: Jones must pay $75 million, and it
must make better disclosures. Less clear is whether Jones must make any changes
in its basic business model.
Mutual funds are extremely important to Edward Jones. They represent half of
its customers' assets. And in 2003, revenue shared by mutual funds accounted
for 33 percent of Jones' net income.
And clearly, this was a firm where money talked. Of the money that Jones
clients invested in mutual funds, 95 percent was placed with the seven
companies that made the revenue-sharing payments.
The payments themselves are legal, and in fact are standard practice at many
other firms. What was illegal, at least in the SEC's view, was the lack of
disclosure.
So, can Jones make better disclosures and keep taking the money? Or will the
disclosure rules be so strict and so onerous that they'll put an end to the
payments?
The settlement doesn't necessarily preclude Jones from continuing to accept
revenue sharing, or from continuing to give brokers incentives to sell certain
funds. The SEC's order requires an independent consultant to decide "whether
Edward Jones' receipt and disclosure of revenue sharing payments is in
compliance."
Jack Coffee, director of the Center for Corporate Governance at Columbia
University Law School, thinks the payments are likely to go away. "When you
have to disclose something, you change what's done," he said. "If you had to
disclose to clients that you are receiving trips to Hawaii because you put them
in mutual fund X instead of mutual fund Y, you might not accept the trip."
Among other incentives, Jones brokers could compete for trips sponsored by the
funds that had revenue-sharing agreements with the firm.
The key, Coffee said, will be how prominent and how clear the new disclosures
are. Edward Jones must list the payments on its Web site, and experts say it
probably will have to make an oral or written disclosure every time a customer
makes a mutual fund purchase.
"The more transparency you give them, the better off customers will be," Coffee
said.
Mercer Bullard, a law professor at the University of Mississippi and founder of
the advocacy group Fund Democracy, thinks the revenue-sharing payments may
survive. That will depend, he said, on convincing customers that they get
something out of the deal.
Jones - and other firms - might be able to tell customers that the revenue
enables their brokers to receive better training and provide better advice,
Bullard said. The firms might even say that the revenue buys software tools for
important services like asset-allocation advice.
"I don't think it (Jones' settlement) undermines the business model, to the
extent their practices are tolerated once they're disclosed to the market,"
Bullard said. "It will tolerate those practices to the extent there is a
persuasive, market-based reason for the conflict of interest."
"I think Edward Jones can design a system where the level of payments has some
relationship to the level of service the client receives," Bullard added. "But
with full disclosure you would kill off those programs where the revenue
sharing payments were some sort of undisclosed bribe."
Still, the distinction between a bribe and a payment for client services may be
a difficult one for the firm to make and for most clients to grasp. The people
writing the disclosures, after all, will have the SEC and a whole pack of
lawyers looking over their shoulders.
If Edward Jones truly wants to reclaim its reputation as a firm that puts
investors first, it may have to renounce this lucrative revenue stream.
E-mail: [email protected]
Phone: 314-340-8213
Radio report: 6:21 p.m. weekdays
on KMOX (1120 AM)
I agree with Wyatt but the wrong that has gone on at Edward Jones started long ago with what I like to call the Van Pearcy road show. Let me tell you the story of Greed and Power at EDJ. I was with the firm well over 5yrs and recently left EDJ was not the first company I worked for. The Van Pearcy road show started in 1999-2000 those of you that were fortunate enough to see this know what I am talking about. Mr. Pearcy would get in front of a group of brokers 100-500 and extoll the virtues of Hartford Funds this in itself is not uncommon what was different was that Mr. Pearcy would give a detail demonstration of how Hartford revenue sharing could improve your bottom line and since Hartford had an NAV program you could move funds from other fund families specifically targeted was American Funds to Hartford and could benefit mostly through improved profitablity of your branch. In my region alot of the senior brokers did this as for me. NO I DID NOT. I couldn’t see moving someone from a fund with a …65% appr to a fund with with a 1.67% expense ratio. Well what happened next was American Funds found out. Tom Bartow left for American Funds and Van Pearcy a million dollar producer was supposedly fired for sexual harrasment. He was just the sacrificial lamb. This practice continued until Hartford changed there NAV program in May 2004.
I think if there was ever an opportunity for the state of California to get all the evidence it needs to close this deal, it’s in the person of Mr. Tom Bartow, “the broker’s broker”. Come back Tom and help us storm the walls and retake the golden city. We’ll throw out the stiff St. Louis boyz club and bring one home for Ted, god rest his soul.
Perhaps that is the saddest part. I believe that Ed and Ted had honest an noble intentions. Good guys with a simple plan and high morals. But this new group of guys, these bastards... have continued to wave that flag, all the while sacrificing their own integrity by deceiving brokers, clients, and regulators. They have torn down all that the Jones' built and stood for.
I could be wrong, maybe Ed and Ted were no different, maybe I am naive, but I don't believe it.
As a broker who was not at the firm during the "Bartow years", what can you tell me about him? I could have sworn I had heard people on the old board criticize him as well, or perhaps my memory is not so strong. What was the consensus on Van Pearcy? Just curious about the history here.