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Friday January 14, 05:12
Jones pocketed $82.4 million in secret payments from funds
(by Peter Van Bruggen)

Jones pocketed $82.4 million in secret payments from funds

Edward D. Jones & Co. published the amount of secret payments it received from mutual funds for pushing their products to consumers. The total amount of $82.4 million is then broken down by fund families.

The numbers were made public in compliance with the $75 million agreement with regulators specifying that Edward D. Jones & Co. failed to disclose the payments in revenue-sharing schemes to investors. Revenue sharing is allowed by the law, but regulators maintain that the lack of disclosure prevents the clients from assessing whether their brokers are not tempted into selling them poor performers that offer stellar broker bonuses instead of healthy funds that do not compensate the brokerage.

The two kinds of payments to the brokers include one-time payments on the number of shares the brokers sell to their clients and also the commission based on the stock volume the broker’s clients hold during the year. A specific arrangement existed with Hartford funds that paid Jones if the annual amount of business with Jones exceeded $1 billion.

The potential conflict of interest for the broker emerged as the poorly performing funds often paid higher revenue-sharing commissions trapping brokers in a situation where they were lured into selecting the fund that will offer the firm higher bonuses. Van Kampen Investments that consistently underperformed other funds in Jones’ palette, paid $22.24 per $10,000 of fund shares sold while the stellar Lord Abbett & Co. never made a one-time payment.The amount of the bonuses scooped up by an individual broker depended on the bonus volume the employee generated for the company during the year.

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