In a statement, Linda Chatman Thomsen, Director of the Division of Enforcement, said, “This distribution marks a significant step in the Commission’s program to return money to investors injured by improper mutual fund practices.”
The distribution resolves action taken by the SEC on Dec. 22, 2004, when the Commission brought settled administrative and cease-and-desist proceedings against Edward Jones for failing to adequately disclose its receipt of revenue sharing payments from a select group of mutual fund companies.
The SEC’s Order, which found that Edward Jones had entered into revenue sharing agreements with seven “Preferred” mutual fund families, required Edward Jones to pay disgorgement and prejudgment interest of $37.5 million and civil penalties of $37.5 million into a Fair Fund for distribution to benefit customers of Edward Jones and to retain an independent consultant to, among other things, administer the Fair Fund. According to the SEC, Edward Jones received tens of millions of dollars of revenue sharing payments from the Preferred Families each year for selling their mutual funds and did not disclose this to its customers, telling them instead that it promoted the fund families because of the funds’ long-term investment objectives and performance.
The distribution plan was approved in June of last year, and stated that current and former customers of Edward Jones who purchased shares of mutual funds of the Preferred Families between Jan. 1, 1999, and Dec. 31, 2004 would receive distributions from the Fair Fund based upon the amount of revenue sharing Edward Jones received for each customer’s investments in mutual funds from the Preferred Families.
Current customers who have active accounts with Edward Jones have received electronic distributions directly to their accounts at Edward Jones while former customers who no longer have active accounts with Edward Jones have been sent physical checks to their last-known addresses as verified by an address validation system, the SEC statement said.