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Edward D. Jones facing class-action complaint alleging reverse churning scheme


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Edward D. Jones facing class-action complaint alleging reverse churning scheme

Edward D. Jones & Co. LP is facing a class-action complaint for allegedly running a reverse churning scheme and unlawfully shifting its commission-based accounts to two fee-based advisory programs named Edward Jones Advisory Solutions and Edward Jones Guided Solutions.

The company also allegedly made misleading statements about the fees clients would pay after their assets were moved into one of the advisory programs and about Edward D. Jones' preference for investing in proprietary funds only available through Edward Jones Advisory Solutions. Clients who engaged in little to no trading activity allegedly paid more in fee-based accounts than they did in commission-based accounts.

The complaint seeks compensatory damages and other relief including actual damages, statutory damages, restitution and disgorgement.

The defendants in the lawsuit filed in the United States District Court for the Eastern District of California include Jones Financial Cos. LLLP, Edward D. Jones CEO James Weddle, and Edward D. Jones General Partners Penelope Pennington, Daniel Timm, Kenneth Cella Jr. and Kevin Bastien. Jones Financial subsidiaries Passport Holdings LLC and Passport Research Ltd. were also named as defendants.

Edward D. Jones "has consistently offered both fee-based and commission-based client accounts that adhere to all regulatory requirements," a spokesman wrote in an email to S&P Global Market Intelligence. The company is reviewing the complaint and plans to vigorously defend the action, according to the email.