Edward Jones, a FINRA member brokerage firm and SEC investment advisor headquartered in St. Louis, MO, settled with the SEC for north of $20M after the firm was alleged by the SEC to have overcharged customers within their municipal bond business along with failing to supervise the review of municipal bonds trading in the secondary market. SEC Admin Release 33-9889/34-75688 (Aug. 13, 2015).
According to the SEC
Their investigation revealed that Edward Jones and Stina R. Wishman, head of municipal underwriting for the firm, took new bonds into the firm’s inventory, subsequently offering them to customers at higher prices rather than offering such bonds to customers at the initial offering price. Additionally, the SEC alleged that Edward Jones would sometimes wait until bonds were trading in the secondary market in preparation for offering customers’ bonds, where such offerings contained prices in excess of initial offering prices. The SEC stated that Edward Jones would purchase the municipal bonds from customers for the firm’s inventory then sell such bonds to customers within the same day – a set of transactions that allowed the firm to mitigate nearly all market risk given the short holding periods. The SEC stated that the firm raked $4.6M in excess of what they should have in the offering of new bonds.
In the course of settling, Edward Jones consented to SEC’s allegations that the firm willfully violated Sections 17(a)(2) and (3) of the Securities Act of 1933, Section 15B(c)(1) of the Securities Exchange Act of 1934, Rules G-17, G-11(b) and (d), G-27, and G-30(a) of the Municipal Securities Rulemaking Board. Additionally, the SEC reported that the firm violated Section 15(b)(4)(E) of the Exchange Act for failing to supervise markups on secondary trades to determine whether certain trades were reasonable. In a separate SEC order, Wishman had consented to allegations that she willfully violated Sections 17(a)(3) of the Securities Act, MSRP Rules G-17, G-11(b) and (d), and G-30(a).
As part of the settlement, Edward Jones has agreed to pay in excess of $20M, a figure which contains over $5M in disgorgement and prejudgment interest intended for the former and current customers that the firm overcharged. Wishman is on the hook for $15,000 and is suspended from the securities industry for at least two years.
FINRA Public Disclosure Records
Public disclosure records reveal that Edward Jones has been subject to a total of 226 disclosure events comprised of 63 regulatory events, 161 arbitrations, and 2 civil events. Public disclosure records also reveal that Stina Wishman was permanently barred by FINRA on August 13, 2015, in connection with the aforementioned conduct.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.