Edward Jones to pay $20M for municipal bond overcharges | Business News

Edward Jones to pay $20M for municipal bond overcharges

13 Aug 2015 | Author: | No comments yet »

Edward Jones agrees to pay $20M for overcharging customers in new municipal bond sales.

Brokerage firm Edward Jones has agreed to pay $20 million to settle charges that it overcharged clients in new municipal bond sales, the Securities and Exchange Commission said Thursday. The SEC said the case was its first against an underwriter in connection with alleged pricing-related fraud in the primary market for municipal bonds. The SEC says the ex-chief of Edward Jones’ municipal bond underwriting desk, Stina Wishman, will pay $15,000 and be barred from working in securities for at least two years. Municipal bond underwriters are required to offer new bonds to their customers at what is known as the “initial offering price,” which is negotiated with the issuer of the bonds.

But instead of offering the bonds to customers at that negotiated price, Edward Jones allegedly brought the bonds into Edward Jones’ own inventory and then later offered them to customers at higher prices, sometimes after the bonds had already begun to trade in the secondary market, according to the SEC. John Boul, a spokesman for Edward Jones, said the firm will fully compensate the 13,000 current and former clients who were affected by the overcharging, which occurred between 2009 and 2013. It alleged in June that 36 underwriters, including some of the largest U.S. banks, sold bonds for localities that failed to make adequate financial disclosures to investors. In one instance, the misconduct resulted in an adverse federal tax determination for an issuer and put it at risk of losing valuable federal tax subsidies. Ceresney, director of the SEC’s Enforcement Division, said in a statement. “This enforcement action, which is the first of its kind, reflects our commitment to addressing abuses in all areas of the municipal bond market.” All clients will have been reimbursed under the settlement, Mr.

Edward Jones undertook a number of remedial efforts and now discloses the percentage and dollar amount of markups on all fixed income retail order trade confirmations in principal transactions. Wishman consented to a separate SEC order without admitting or denying the findings that she willfully violated Sections 17(a)(3) of the Securities Act, MSRB Rules G-17, G-11(b) and (d), and G-30(a).

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