Thursday, June 30, 2011

Industry "self-regulator" declines to censure Edward Jones

     (May 13, 2013) We were gratified last autumn that as a result of our reporting (, the Federal Industry Regulatory Authority (FINRA) launched an investigation into the policies and practices of financial-services firm Edward Jones.
    Today, after all these many months, we have received a stunningly terse letter from FINRA,  the financial services industry's "self-regulatory" agency, that says simply, "Based on our assessment of the information (you provided), FINRA has closed its investigation of this matter." No explanation or elaboration whatsoever was provided. Our serious allegations were not confronted or even acknowledged.
    "Investor protection. Market integrity." 
    That's FINRA's slogan, according to the letter I received from Teresa Proberts, examination manager.
    "The Edward Jones Saga," our heavily documented, 25,000-word coverage of Edward Jones' sales techniques and deceptive tactics, seems to have come as no surprise and caused no concern to FINRA, the industry's apologist and protector. 
    Our investigation describes the firm's refusal to disclose how much money, in numerous hidden fees and commissions, was removed from our accounts, without our knowledge or consent. Edward Jones refuses even to provide a rate of return on hundreds of thousands of dollars in investments, or to explain why it engaged in a shocking flurry of commission-based buying and selling on our behalf (behind our backs), which benefited no one but itself.  
    Our investigation described the steering of millions of clients into "preferred" funds that give Edward Jones a kickback, whether those funds are in the client's best interests or not. We recounted the anguished stories of numerous people who have lost some or all of their life savings due to Edward Jones' tactics, and we disclosed how the firm plans to take millions in federal funds to "train" returning veterans to become its new generation of salespeople. 
    The firm usually pays for this instruction itself, which it claims costs tens of thousands of dollars per trainee. Any trainee who fails to complete the course and establish a successful franchise for himself -- and most new hires DO FAIL -- will lose the GI benefits that would have paid for a college education.

FINRA's modest headquarters building in Rockville, MD.
    "FINRA's mission is to protect America's investors by making sure the securities industry operates fairly and honestly," its web site states. "It is dedicated to investor protection and market integrity through effective and efficient regulation of the securities industry."
    Ha hah!!
    If you read a newspaper regularly, you must wonder where FINRA has been all your life. Rampant fraud and deception are uncovered pretty much every day, and it's not by this private corporation, which acts as the industry's personal watchdog -- or should we say "lapdog"?
    Where was FINRA during the many years that Edward Jones failed to disclose kickbacks it received from a select group of mutual fund families that the firm aggressively marketed to its customers? Where was FINRA when the Securities and Exchange Commission, the California attorney general and several class-action lawsuits compiled thousands of pages of documents outlining the firm's unconscionable business practices? Where was FINRA as enraged consumers all over the Internet described their betrayal by Edward Jones?
    "When the rules are broken, FINRA takes action," says the organization's CEO Richard Ketchum. "Our strong and vigorous enforcement program brings discipline where investors have been harmed."
    Meanwhile, New Hampshire regulators said in a complaint last month that Edward Jones' brokers knock on doors to circumvent the do-not-call rules. The suit seeks a $3 million fine, according to a May 13 Bloomberg article. John Boul, a spokesman for the company, said the case was based on a single complaint and that the firm denied the allegations, the article added.
    Edward Jones' deceptively earnest, aw-shucks sales approach still seems to be working, Bloomberg added. "Net revenue for Jones Financial Cos., the brokerage’s closely held parent, rose to a record $5.03 billion last year and has climbed 42 percent since 2009, outpacing Merrill Lynch’s 10 percent growth in the period," the article said.  
    I was unaware that Jones Financial Cos., LLP, existed until today. 
    Edward Jones and Co., LP, (the company to which my family entrusted its savings) has always made a big deal of the fact that it is not a corporation but rather a partnership, owned by its financial advisors. This was presented as an enlightened, "one big family, sharing the spoils" approach to profiteering. Now that I realize the existence of this "closely held parent," Jones Financial Cos., it's unclear just how much brotherly love is being parceled out and how much of it is kicked upstairs. 
    We earlier asked readers if they'd like to place bets on whether any reforms or sanctions would be forthcoming from FINRA's  "investigation" (or was it a get-together in Maui?) into our complaints. We all bet against FINRA, so no money changed hands.