Edward Jones Fined $200,000 Over CD Sales

The New York Stock Exchange on Wednesday fined brokerage firm Edward Jones & Co. $200,000 for improperly supervising the sale of about $3 billion worth of long-term certificates of deposit.

“In certain instances, the registered representatives did not adequately disclose the features and risks of the investment to customers,” the NYSE said.

The CDs in question are known as “callable” CDs and are more volatile than typical CDs, which promise to return what an investor pays for them, minus a penalty for early withdrawals. The CDs also have a longer maturity period, about 10 to 15 years, and their market value can fluctuate with interest rates.

About 104 customers who bought the CDs from Edward Jones registered complaints ranging from being misinformed about the possible fluctuating market value of the CDs and the length of their maturity, the NYSE said. About 80% of the complainants were older than 65 during the period the CDs were sold from October 1994 to June 1997.

“The salient features of callable CDs caused confusion among these complaining customers, who primarily were elderly customers seeking short-term, fixed income securities,” the NYSE said.

Edward Jones, which settled the NYSE’s charges without admitting or denying them, said that fewer than one out of every 1,000 buyers of the CDs complained about them.

“We are disappointed that the New York Stock Exchange questioned our sale of callable certificates of deposit,” the firm said in a statement. “Of course, our goal is for all clients to fully understand the investments they purchase from Edward Jones, and we continue to fine-tune our training and sales practices.”

The Securities and Exchange Commission said it has received more than 300 complaints related to CDs, five times more than last year, according to a report in the Wall Street Journal.

The SEC is investigating 33 brokerages, including Edward Jones, A.G. Edwards Inc., Merrill Lynch & Co., Morgan Stanley Dean Witter & Co., PaineWebber, Prudential Securities, Salomon Smith Barney and Raymond James & Associates Inc., the paper said.

An SEC spokesman declined to comment on the report.