Posted on 12/20/2004 12:32:39 PM PST by NormsRevenge
LOS ANGELES (AP) - State Attorney General Bill Lockyer filed a securities-fraud lawsuit Monday against Edward D. Jones & Co., alleging the investment giant received $300 million in improper payments to push seven mutual funds to its clients.
The announcement came the same day that the Securities and Exchange Commission settled with the St. Louis-based brokerage firm for $75 million, but Lockyer said clients who were deceived deserved a larger payout.
John Boul, spokesman for Edward Jones, did not immediately return calls for comment.
The lawsuit, filed in Sacramento County Superior Court, charged the company instituted a policy in 2000 in which brokers would receive commissions, contest points and special vacations as incentives for selling the so-called Preferred Funds. The funds in return paid the firm for so-called "shelf space."
Locker said the practice violates California law because the brokerage firm failed to tell investors of the incentives it received from the preferred funds.
The suit seeks restitution and damages for clients, the disgorgement of the $300 million and up to $25,000 in fines for each violation of the state's Corporate Securities Law.
"Edward Jones broke the law and broke faith with the working families of California, who placed their trust in the company's investment recommendations," Lockyer said at a news conference.
Edward Jones has sold nearly $6 billion of mutual funds in California since January 2000 to nearly 300,000 accounts, authorities said. Lockyer said 98 percent of the funds sold during that time were from the Preferred Funds group.
Lockyer displayed e-mails from 13 disgruntled Edwards Jones brokers who he said felt uncomfortable with the practice but felt pressured to sell the preferred funds to win points and bonuses.
Some of the e-mails reference recent SEC investigations into brokerage giants Merrill Lynch and Morgan Stanley. The commission is investigating about a dozen brokerage firms on allegations they didn't secure the best price on stocks traded for customers.
"Seeing that our preferred list of vendors is one of the smallest in the industry and that we have heavy monetary motivations to sell off of that, how will regulators look at that in light of the recent mutual fund scandal?" one broker wrote. "It cannot be argued that our brokers don't have extra motivation to sell off the preferred list because we do - revenue sharing & counting towards trips to name 2 big ones."
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On the Net:
Edward D. Jones & Co.: http://www.edwardjones.com
California Attorney General's Office: http://caag.state.ca.us
Edward Jones, eh? The only Edward Jones guy I know used to sell used cars. Now he sells mutual funds and calls himself a "financial planner." He filed bankruptcy a couple of years ago. I think I'll pass on his advice.
Better check out ol' Maxine Waters and her kids. Seems they have been dipping their collective bills in various places in CA!
They are on every corner in St.L. But so are pimps, crack-dealers and Ho's!
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