Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, April 9, 2009

Edward D. Jones Settles FINRA Charges for Failure to Deliver Official Statements in Municipal Securities Sales

FINRA announced today that it 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. 

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.  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.

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