Edward Jones - Consent Order - S-25-3996-25-CO01

1 STATE OF WASHINGTON DEPARTMENT OF FINANCIAL INSTITUTIONS 2 SECURITIES DIVISION 3 IN THE MATTER OF DETERMINING Order No. S-25-3996-25-CO01 Whether there has been a violation of the 4 Securities Act of Washington by: 5 CONSENT ORDER 6 EDWARD D. JONES & CO., L.P; 7 8 Respondent. 9 INTRODUCTION 10 Pursuant to the Securities Act of Washington, chapter 21.20 RCW (“Securities Act”), and after 11 investigation, careful review, and due consideration of the facts and statutory provisions set forth below, the 12 Washington State Department of Financial Institutions, Securities Division (the “Division”) hereby finds 13 that there is good cause, and it is in the public interest to enter into a Consent Order (the “Order”) with 14 Edward D. Jones & Co., L.P. (“Edward Jones”), which hereby agrees to resolve any and all issues in 15 controversy regarding the specific conduct described herein on the terms set forth in this Order. As the result of a coordinated investigation, Washington concluded that Edward Jones charged 16 unreasonable commissions on certain small principal equity transactions. Nationwide, Edward Jones charged 17 unreasonable commissions on approximately 781,240 equity transactions from May 1, 2020, to April 30, 18 2025 (the “Relevant Time Period”), totaling $11,287,504. 19 Edward Jones, in full settlement of these matters, neither admits nor denies the Findings of Fact as 20 set forth in Section III, and neither admits nor denies the Conclusions of Law set out in Section IV. 21 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 1 1 I. JURISDICTION 2 1. The Securities Administrator of the Washington Department of Financial Institutions, 3 Securities Division, has jurisdiction pursuant to RCW 21.20.460. 2. The acts and practices that are the subject of this Order occurred while Edward Jones was 4 registered as a broker-dealer in Washington State. 5 II. RESPONDENT 6 3. Edward D. Jones & Co., L.P. (“Edward Jones”) is a broker-dealer registered in Washington 7 with a main address of 12555 Manchester Road, St. Louis, Missouri 63131. Edward Jones is identified by 8 Financial Industry Regulatory Authority (“FINRA”) CRD No. 250 and has been registered in the state of 9 Washington since April 20, 1983. 10 III. FINDINGS OF FACT 11 A. Edward Jones’s Minimum Commission Practices for Certain Equity Transactions Failed to Ensure Transactions Were Executed at a Fair and Reasonable Price 12 4. During the Relevant Time Period, Edward Jones charged unreasonable commissions to 13 thousands of retail brokerage customers on certain equity transactions. 14 5. During a portion of the Relevant Time Period, Edward Jones charged a minimum fixed 15 commission of $50 on certain equity transactions (the “Minimum Equity Commission”). 6. The Securities Act and regulations promulgated thereunder prohibit Edward Jones from 16 charging unreasonable commissions for services performed. 17 7. FINRA Rule 2121 Supplementary Material .01 (Rule 2121.01) sets a guideline of five percent 18 for determining whether a commission is unfair or unreasonable. However, the “5% Policy” is a guide, not 19 a rule. A commission pattern of five percent or even less may be considered unfair or unreasonable. 20 8. During the Relevant Time Period, Edward Jones executed 25,616 equity transactions in 21 Washington which included an unreasonable commission for services performed (i.e., in excess of 5% of the principal trade amount), totaling $361,844.96. 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 2 1 9. Numerous equity transactions executed by Edward Jones included a commission well in 2 excess of 5% of the principal value of the transaction. 3 B. Edward Jones Did Not Reasonably Supervise Transactions Which Applied the Minimum 4 Equity Commission 10. Edward Jones did not reasonably supervise transactions that included the Minimum Equity 5 Commission charge to ensure that Edward Jones charged its customers a reasonable commission. 6 11. Edward Jones’s policies and procedures contemplated review of commissions as part of 7 normal supervisory review processes. 8 12. Edward Jones’s policies and procedures also contemplated a quarterly review of data related 9 to small principal transactions that could result in excessive commissions. 10 13. Supervisors were permitted to make adjustments to ensure that commissions were reasonable. 11 14. Despite these systems, Edward Jones’s surveillance policies failed to reasonably detect and correct unreasonable commission charges, specifically as it relates to the Minimum Equity Commission. 12 15. As a result, Edward Jones failed to adequately supervise small principal equity transactions 13 where the Minimum Equity Commission was in excess of 5%. 14 Based upon the above Findings of Fact, the following Conclusions of Law are made: 15 IV. CONCLUSIONS OF LAW 16 16. The preceding paragraphs are incorporated by reference as though set forth verbatim herein. 17 17. Edward D. Jones & Co., L.P. is a broker-dealer as defined in RCW 21.20.005(1). 18 18. Pursuant to RCW 21.20.110(1)(j) and WAC 460-20C-150(1)(e), it is a violation of the Securities Act for a registered broker-dealer firm to fail to establish and maintain a system to reasonably 19 supervise its agents. 20 19. Edward Jones’s acts and practices, as described above, constitute a violation of WAC 460- 21 20C-150(1)(e), and are grounds for censure and a fine pursuant to RCW 21.20.110(1)(j). 22 Based upon the foregoing and finding it in the public interest: 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 3 1 V. CONSENT ORDER 2 20. On the basis of the Findings of Fact, Conclusions of Law, and Edward Jones’s consent to the 3 entry of this Order, IT IS HEREBY AGREED AND ORDERED: 4 A. Edward Jones shall cease and desist from conduct in violation of WAC 460-20C-150(1)(e). B. Edward Jones is censured by the Division; 5 C. Edward Jones shall provide restitution in an amount of no less than $361,844.96, representing the 6 portion of the commission on certain small principal equity transactions that exceeded 5% of the 7 principal trade amount during the Relevant Time Period to the affected Washington customers, 8 plus interest in the amount of 6% from the date of the transaction to May 19, 2025. Edward Jones 9 shall provide restitution within one hundred eighty (180) days of execution of this Order; 10 D. Restitution shall be in the form of a dollar credit to current customer accounts, or a check for all 11 former customers; E. Edward Jones shall provide a notice of restitution to customers on terms not unacceptable to 12 Massachusetts, Montana, Missouri, Alabama, Washington, Texas, and Iowa (the “Multi-state 13 Group”) (“Notice Letter”) for use by all participating jurisdictions. The Notice Letters shall be 14 sent at least seven (7) days prior to the distribution of any restitution. Within forty-five (45) days 15 of the mailing of the Notice Letter, Edward Jones shall provide the Division with a list of all 16 Washington residents for whom Edward Jones receives a Notice Letter as returned to sender or 17 otherwise undeliverable. To the extent the Division has access to different address information, Edward Jones shall mail a second Notice Letter to each Washington resident within thirty (30) 18 days of the Division providing such different address; 19 F. Within forty-five (45) days of completion of distribution of restitution, Edward Jones shall 20 prepare, and submit to the Division, a report detailing the restitution paid pursuant to the Order, 21 which shall include dates, amounts, and methods of the transfer of funds for all restitution 22 payments; 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 4 1 G. Edward Jones shall pay (a) an administrative fine in the amount of $100,000 and (b) the costs of 2 investigation in the amount of $25,000 to the Division within the later of fifteen (15) days (i) 3 following the date of entry of the Order; or (ii) following Edward Jones’s receipt of the necessary payment documentation and instructions to be provided by the Division. Payment shall be (1) 4 made by United States postal money order, certified check, bank cashier’s check, bank money 5 order, or wire; (2) made payable to the Washington Department of Financial Institutions; (3) 6 either hand-delivered, mailed to the Washington Department of Financial Institutions; or wired 7 per the Securities Division’s instructions; and (4) submitted under cover letter or other 8 documentation that identifies payment by Respondent and the docket number of the proceeding; 9 H. Edward Jones agrees that an employee not unacceptable to the Multi-State Group shall certify in 10 writing to the Division within sixty (60) days of the date of entry of the Order that Edward Jones’s policies and procedures have been changed and enhanced to ensure that all commissions are fair 11 and reasonable. At a minimum, Edward Jones shall certify that its policies and procedures include 12 the following: 13 i. Compliance systems to prevent the imposition of unreasonable or unfair commissions; 14 ii. Operational changes designed to ensure that, regardless of the principal amount of a 15 transaction, commissions will not exceed 5%, in the absence of a documented exception; 16 iii. Incorporation of all transactions, regardless of the principal amount of the transaction, 17 into any systems used to identify and review potentially excessive commissions; and iv. Revisions to its policies and procedures sufficient to ensure the adequate implementation 18 of the above. 19 I. Edward Jones shall not claim, assert, or apply for a tax deduction or tax credit with regard to any 20 state, federal or local tax for any amounts that Edward Jones shall pay pursuant to the Order; 21 J. Edward Jones shall not seek or accept, directly or indirectly, reimbursement or indemnification, 22 including, but not limited to, any payments made pursuant to any insurance policy, with regard 23 to any amount that Edward Jones shall pay pursuant to the Order; CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 5 1 K. If Edward Jones is the subject of a voluntary or involuntary bankruptcy petition under Title 11 of 2 the United States Code within three hundred sixty-five (365) days of the entry of the Order, 3 Edward Jones shall provide written notice to the Division within five (5) days of the date of the petition. 4 L. Any fine, penalty, and/or money that Edward Jones shall pay in accordance with the Order is 5 intended by Edward Jones and the Division to be a contemporaneous exchange for new value 6 given to Edward Jones pursuant to 11 U.S.C. § 547(c)(1)(A) and is, in fact, a substantially 7 contemporaneous exchange pursuant to 11 U.S.C. § 547(c)(1)(B). 8 M. If Edward Jones fails to materially comply with any of the terms set forth in the Order, the 9 Division may institute an action to have the Order declared null and void. Additionally, after a 10 fair hearing and the issuance of an order finding that Edward Jones has not complied with the Order, the Division may move to have the Order declared null and void, in whole or in part, and 11 re-institute the associated proceeding that had been brought against Edward Jones; and 12 N. For good cause shown, the Division may extend any of the procedural dates set forth above. 13 Edward Jones shall make any requests for extensions of the procedural dates set forth above in 14 writing to Washington. 15 O. Edward Jones enters into this Consent Order freely and voluntarily and with a full understanding 16 of its terms and significance. 17 VI. WAIVER 18 21. Edward Jones hereby waives all rights to contest this Order, including, but not limited to, (A) 19 the right to contest whether the Order is fair, reasonable, and/or in the public interest, (B) the right to contest the Order’s findings of fact, and (C) the right to contest the Order’s conclusions of law. Edward Jones further 20 waives the procedural due process right to a hearing and to judicial review of this matter pursuant to Chapter 21 34.05 RCW and any other procedural rights provided by the Securities Act. 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 6 1 VII. NO DISQUALIFICATION 2 22. This Order waives any disqualification in the Securities Act, or rules or regulations 3 thereunder, including any disqualification from relying upon the registration exemptions or safe harbor provisions to which Edward Jones may be subject. The Order is not intended to be a final order based upon 4 violations of the Securities Act that prohibit fraudulent, manipulative, or deceptive conduct. The Order is not 5 intended to form the basis of any disqualifications under Section 3(a)(39) of the Securities Exchange Act of 6 1934; or Rules 504(b)(3) and 506(d)(1) of Regulation D, Rule 262(a) of Regulation A and Rule 503(a) of 7 Regulation CF under the Securities Act of 1933. The Order is not intended to form the basis of 8 disqualification under the FINRA rules prohibiting continuance in membership absent the filing of a MC- 9 400A application or disqualification under SRO rules prohibiting continuance in membership. The Order is 10 not intended to form a basis of a disqualification under 204(a)(2) of the Uniform Securities Act of 1956 or Section 412(d) of the Uniform Securities Act of 2002. Except in an action by the Division to enforce the 11 obligations of the Order, any acts performed or documents executed in furtherance of the Order: (a) may not 12 be deemed or used as an admission of, or evidence of, the validity of any alleged wrongdoing, liability, or 13 lack of any wrongdoing or liability; or (b) may not be deemed or used as an admission of; or evidence of, 14 any such alleged fault or omission of Edward Jones in any civil, criminal, arbitration, or administrative 15 proceeding in any court, administrative agency, or tribunal. 16 23. This Order shall be binding upon Edward Jones and its successors and assigns, as well as to 17 successors and assigns of relevant affiliates, with respect to all conduct subject to the provisions above. 24. This Order and any dispute related thereto shall be construed and enforced in accordance with, 18 and governed by, the laws of Washington without regard to any choice of law principles. 19 20 21 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 7 1 Signed this ___26th____ day of ___March________________________ 2026. 2 3 Signed by: Edward D. Jones & Co., L.P. 4 5 6 _/s/_________________________ 7 Keir Gumbs 8 Chief Legal Officer 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 8 1 Approved as to form by: 2 3 __/s/______________________________ 4 Kenyon Hall, Attorney for Edward D. Jones & Co., L.P. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 9 1 SIGNED and ENTERED this 5th day of May, 2026. 2 3 4 5 __/s/_____________________________ 6 Faith L. Anderson Acting Securities Administrator 7 8 Approved by: Presented by: 9 10 11 __/s/___________________________ __/s/___________________________ Brian J. Guerard Imran Sultan 12 Chief of Enforcement Financial Legal Examiner 13 Reviewed by: 14 15 16 _/s/______________________________ Adam Yeaton 17 Financial Legal Examiner Supervisor 18 19 20 21 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 10