Broker Got $82 Million to Push Funds

[The Backlash Cometh]

Disclosure of so-called revenue-sharing payments to Edward Jones in 2004 had been ordered by the SEC.

Los Angeles-based American Funds and six other mutual fund companies paid a total of $82.4 million to brokerage Edward Jones & Co. for selling their products through the first 11 months of last year, according to records disclosed Thursday.

The extremely unusual disclosure was demanded by the Securities and Exchange Commission and other federal regulators, who said the St. Louis-based brokerage failed to tell customers that the funds on its "preferred list" paid millions of dollars to be there.

Edward Jones is licensed to sell mutual funds from 240 families, but more than 95% of its fund sales in recent years have come from the seven preferred fund groups.

California Atty. Gen. Bill Lockyer, who sued Edward Jones last month alleging civil securities fraud, called Thursday's disclosures "a good step, but inadequate." The payments pose an inherent conflict of interest, Lockyer said, because brokers know that they will make more money if they steer clients to preferred funds.

"If you want to have a preferred list, OK, but don't take money for it," Lockyer said in an interview. "I think they should just discontinue the practice of getting kickbacks."

http://www.latimes.com/business/la-fi-jones14jan14,0,1155442.story?coll=la-home-business

[Bono71]

1. Agree completely...stopping those kinds of payments would

be a good step in reforming the system.

[ladjf]

2. I believe we are talking about stopping the world's second oldest

profession.

[gratuitous]

3. C'monnnnnn, invest your Social Security funds in the stock market

Oh sure, there's one or two bad apples on Wall Street, but YOU won't get suckered into buying some questionable investment just because some shady dealer has funneled a few million (okay, 82 million) dollars to some broker. C'monnnnnn.

WHAT IN THE HELL are people thinking, tossing their social security money into that high-toned three card monte game?

[Yupster]

5. Questionable investments?

American Funds?

They're one of the largest and cheapest mutual fund families out there. It's where John Edwards had the bulk of his investment dollars.

Let's not go overboard now.

[Bono71]

6. I own some shares in those funds. Pretty decent performance...

though I wish I had Johnny Boy's stash, lol...

If I could do it all over again, I'd be a trial lawyer...

[Straight Shooter]

10. Well, if you're not a huge success in your chosen profession ...

... then you probably wouldn't be a huge success as a trial lawyer, either.

Edwards would probably have been successful in any endeavor which rewards its professionals financially.

[Bono71]

14. I don't doubt that...and I

dect a little venom in your post. I consider myself successful...thank you very much....

[gratuitous]

7. If American Funds is a sound investment

Why are they colluding with other mutual funds to pay a brokerage firm $82 million to recommend them? And are you saying that because John Edwards has money in American Funds, that automatically qualifies it as a sound investment?

[AP]

12. Edwards has relatively little in those funds....

It's like between .5% - 1.5% of all the money he's invested according to his FEC filing.

http://www.opensecrets.org/pfds/candlook.asp?CID=N00002283

[Squatch]

13. Edward Jones...not John Edwards

as in the brokerage house

[LizW]

15. I have some money in American Funds

They perform very well, and in the years up to about '95, they did great.

My broker pushes these funds (he's not with Edward D. Jones) and I asked him outright if he was getting anything extra for selling them. He said no, but I have to wonder. Why would American Funds make this arrangement ONLY with Edward Jones?

[CountAllVotes]

17. cheap? What about the 5.75% load American Funds charges?

Far from "cheap" and it could take you well over a year to earn enough on their mutual funds to realize a gain because of their "load".

:grr:

:kick:

[UpInArms]

8. people would do better investing

with the mob - at least "vinnie" would loanshark your $$ out for some really good interest :eyes:

[indypaul]

4. The line between

first and second oldest profession seems very
blurred under these circumstances. The customer
or if you prefer the "john" still pays the bill
and gets screwed.

[xchrom]

9. boyyyyy -- the vultures will be in dead hog heaven

when they can get their hands on the millions of small investors who have to put their retirement in wall streets hands.
there is so much unethical behavior on wall street -- that it boggles that reasonable people would push this as a solution.

[Squatch]

11. Not true:

"because brokers know that they will make more money if they steer clients to preferred funds."

Edward Jones brokers are paid 3.5% commission (before any breakpoints) on the sale of mutual funds, including ones not in the preferred list.

[Guns Aximbo]

16. Truth is dead in America

... and they talk of moral values?

[havocmom]

18. American Business is only in the business of selling stocks

And to that end, they will do ANYTHING. Products/services? Nah, there's no real $$ in selling those. Stock's the thing.... Hey, we need to sell more stock! Pay people to sell stock. Cook the books to look good so we can sell stocks! We don't need no stinking labor force, lay 'em off, wages just drive up cost. We don't really want to produce anything. We just need to sell stock and things will be fine.

What the hell is all the $$ in the SS trust fund doin, just laying around there? Wow, what we could do when we get our mitts on the payroll taxes for SS! Force those dumb working stiffs into buying stocks! That'll keep our yachts floating for another couple decades.

So, where will those payroll tax/forced investments come from when they have outsourced the job of the last American worker?

Ask ENRON investors how they feel about relying on stocks for retirement!