Edward Jones to Settle Class Actions

Edward D. Jones & Co. has signed a tentative $127-million settlement in nine class-action lawsuits for questionable revenue-sharing and sales practices from 2004, the brokerage firm announced Thursday.

The St. Louis-based company is awaiting a U.S. District Court judge’s approval on the settlement. It would return $55 million in cash to customers and cover legal fees. It would also provide $72.5 million in noncash vouchers to current clients.

In December 2004, the Securities and Exchange Commission finished its investigation of the brokerage firm and found that it created a conflict of interest by failing to disclose to its customers a revenue-sharing deal with mutual fund companies.

Soon after, in a separate settlement, then-U.S. Atty. James Martin announced a $75-million deal with Edward Jones to avoid criminal charges from the Justice Department.

That money is expected to be distributed this month to Edward Jones customers in a special account to compensate investors known as a Fair Fund, separate from the class-action settlement.

“We believe the 2004 settlement agreement with regulators addressed all the relevant concerns regarding this issue,” Edward Jones managing partner James Weddle said in a statement. “However, because we do not believe our clients, our associates or our firm would benefit from a prolonged legal battle, we’ve decided to settle the class-actions suits.”

Edward Jones did not admit to wrongdoing and has since agreed to disclose and tell customers about revenue-sharing agreements on its website.

Edward Jones had revenue-sharing deals that were in question with seven mutual fund companies: Goldman Sachs, Federated, American Funds, Putnam, Van Kampen, Lord Abbott and Hartford.

In exchange, Edward Jones designed those mutual funds as Preferred Fund Families with special benefits given to those companies.