FINRA Fines Edward Jones For Supervisory Failures

FINRA recently announced that it has fined Edward D. Jones & Co., L.P. of St. Louis $900,000 for its failure to timely deliver official statements to customers who purchased new-issue municipal securities and related supervisory and recordkeeping failures.

With limited exceptions, broker-dealers selling a new-issue municipal securities are required under the rules of the Municipal Securities Rulemaking Board (MSRB) — which are enforced by FINRA — to deliver a copy of the official statement to the customer on or before settlement date. New-issue securities are those sold during the initial distribution of bonds to the public.

FINRA found that Edward Jones’s late deliveries occurred when the firm was conducting retail transactions but was not a member of the underwriting syndicate for a new issue.

FINRA further found that the firm’s failures from 2002 through 2006 were systemic. During that time period, Edward Jones engaged in approximately 100,000 new-issue municipal bond transactions in which it was not an underwriter. For a significant number of those transactions, the firm was late in delivering official statements to its customers. The firm’s systemic late deliveries had multiple causes, including lack of training for employees, incorrect instructions to employees, limited photocopying capacity and errors by employees of the firm, including trading supervisors.

The late deliveries continued. In September 2008 alone, the firm was late in mailing official statements to customers in over 6,200 transactions, which represented 19 percent of the firm’s municipal bond transactions covered by the applicable MSRB rule.

FINRA further found that Edward Jones’s own internal communications repeatedly referenced that it was not timely delivering official statements. Nevertheless, the firm failed to take reasonable and sufficient steps to comply with its delivery obligations.

FINRA also found that Edward Jones failed to keep required records, did not have written supervisory procedures addressing the requirements for delivery of official statements until May 2006, and that those procedures contained incorrect guidance. As part of the settlement, an officer of Edward Jones will certify that it has adopted and implemented systems and procedures reasonably designed to ensure compliance with MSRB rules, including systems and procedures to provide adequate oversight if third party vendors are utilized.

In settling this matter, Edward Jones neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.

According to its own website, Edward Jones has over 10,000 branch offices throughout the country (more than any other investment firm in America).

If you have questions about municipal securities you purchased through Edward Jones, The White Law Group may be able to help.  For a free consultation, call the firm at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. With over 30 years of securities law experience, including experience working at FINRA (f/k/a the NASD) and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions.

For more information on The White Law Group, please visit our website at http://whitesecuritieslaw.com.