Edward Jones to Pay $725K for Reporting Lapses
The Financial Industry Regulatory Authority’s enforcement unit censured and fined Edward Jones $725,000 for failing to supervise its brokers’ use of consolidated reports, according to a letter of settlement issued Thursday.
From 2010 to 2014, Edward Jones could not “reasonably” ensure that some 52 million consolidated reports that its brokers prepared for clients included accurate information, Finra said. The reports purported to show clients’ total holdings, including assets held outside the firm, according to the settlement.
“[T]he Firm had no system or written procedures in place reasonably designed to minimize the risk that the reports could contain inaccurate information that potentially could be misused,” it said.
Jones, whose almost 15,000 brokers work primarily out of single-advisor offices across the U.S., settled the charges without admitting or denying the findings.
An “unintentional vendor-created design flaw” allowed brokers to manually edit the reported assets, the settlement said, and Jones had no system to monitor whether or when reports were distributed to customers.
The settlement highlights challenges for broker-dealers that are promoting advisors’ ability to offer “holistic planning” that is enhanced by having knowledge of customers’ overall assets and liabilities.
The settlement notice said Finra found no evidence of misuse or inaccuracy in its retroactive review of the reports sent by Edward Jones’ brokers. The self-regulator has highlighted the potential for ‘high-risk brokers’ to manipulate holdings reports as a 2017 examination priority.
Finra credited Edward Jones for its remedial efforts on the reporting issue, citing a “comprehensive review” it has made of its supervision, a risk-based review of reports and creation of new procedures for verifying outside assets.