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Edward Jones Pays $20 Million to Settle Claims it Overcharged Clients on Bonds

By Erwin J. Shustak, Esq.  of Shustak Reynolds & Partners, P.C. posted on Thursday, August 13, 2015.

Erwin J. Shustak

Erwin J. Shustak

Managing Partner

LocationSan Diego, California
New York, New York
Phone: (619) 696-9500 (Ext. 109)
(800) 496-5900 (Ext. 109)
Email[email protected]

Edward Jones, which has over 14,000 brokers and more than 7 million customers, agreed to pay $20 million to settle SEC charges that it overcharged its retail clients on new municipal bonds sales.

According to the SEC charges, Edward Jones overcharged clients more than $4.6 million on new municipal bond issues by charging clients a higher mark-up than permitted by securities laws.  Instead of selling the bonds to its customers at prices negotiated with the issuers of those bonds, the firm, instead, bought the bonds for its own inventory and then illegally marked-up the bonds and sold them at inflated prices to its customers. The SEC charged Edward Jones with being “at least negligent” in regard to these overcharges.

The firm neither admitted nor denied the allegations, a standard form of settling SEC charges, but did agree to pay at $20 million fine to settle the alleged charges.  The $20 million includes over $5 million of disgorgement for clients who were overcharged, including accrued interest. 

“Edward Jones undermined the integrity of the bond underwriting process by overcharging retail customers by at least $4.6 million and by misleading municipal issuers,” Andrew J. Ceresney, director of the SEC's Enforcement Division, said in a statement. “This enforcement action, which is the first of its kind, reflects our commitment to addressing abuses in all areas of the municipal bond market.”

The SEC said the firm did not have a supervisory system in place to make sure the markups it charged customers on certain transactions were reasonable.

Shustak Reynolds & Partners, P.C. has extensive expertise and experience in the areas of securities, financial services and business law. For more information contact Erwin J. Shustak, Esq, Managing Partner, at 619.696.9500 or via email at [email protected].

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