FINRA Fines Edward Jones $900,000 for Failing to Timely Deliver Official Statements to Customers in Municipal Bond Sales.
With limited exceptions, broker-dealers selling a new-issue municipal securities are required under the rules of the Municipal Securities Rulemaking Board (MSRB) - which are enforced by FINRA - to deliver a copy of the official statement to the customer on or before settlement date. New-issue securities are those sold during the initial distribution of bonds to the public.
"Official statements contain important financial information for investors about the issuing municipality and the bonds they are purchasing," said Susan L. Merrill, FINRA Executive Vice President and Chief of Enforcement. "This firm was consistently late in delivering those statements even though it was repeatedly on notice about its delivery failures."
FINRA found that Edward Jones's late deliveries occurred when the firm was conducting retail transactions but was not a member of the underwriting syndicate for a new issue.
FINRA further found that the firm's failures from 2002 through 2006 were systemic. During that time period, Edward Jones engaged in approximately 100,000 new-issue municipal bond transactions in which it was not an underwriter. For a significant number of those transactions, the firm was late in delivering official statements to its customers. The firm's systemic late deliveries had multiple causes, including lack of training for employees, incorrect instructions to employees, limited photocopying capacity and errors by employees of the firm, including trading supervisors.
The late deliveries continued. In September 2008 alone, the firm was late in mailing official statements to customers in over 6,200 transactions, which represented 19 percent of the firm's municipal bond transactions covered by the applicable MSRB rule.
FINRA further found that Edward Jones's own internal communications repeatedly referenced that it was not timely delivering official statements. Nevertheless, the firm failed to take reasonable and sufficient steps to comply with its delivery obligations.
FINRA also found that Edward Jones failed to keep required records, did not have written supervisory procedures addressing the requirements for delivery of official statements until May 2006, and that those procedures contained incorrect guidance. As part of the settlement, an officer of Edward Jones will certify that it has adopted and implemented systems and procedures reasonably designed to ensure compliance with MSRB rules, including systems and procedures to provide adequate oversight if third party vendors are utilized.
In settling this matter, Edward Jones neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2008, members of the public used this service to conduct 11.6 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through comprehensive regulation. FINRA touches virtually every aspect of the securities business - from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and firms.
For more information, please visit our Web site at www.finra.org.
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|Date:||Apr 9, 2009|
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