Edward D. Jones Fined $200K + $52,000 in Restitution for Improper ETF Sales

FINRA fined Edward D. Jones & Co. LP $200,000 and ordered $52,000 in restitution to a series of customers it says were improperly sold non-traditional exchange-traded funds ("ETFs"). FINRA ordered the restitution for 62 adversely affected Edward Jones investor accounts.

FINRA Case #2010022283702

According to FINRA's findings, Edward Jones failed to establish and maintain a supervisory system designed to address the firm's sales of nontraditional ETFs (leveraged and inverse ETFs).

Because of this failure to supervise and lack of written supervisory procedures, investigators allege firm representatives were able to make unsuitable recommendations of nontraditional ETFs to multiple customers whose investment profile did not mesh with the properties of the complex product.

The investigation states that affected investors planned to hold the ETFs on a long-term basis or were otherwise risk-averse. A prior regulatory notice had advised firms that nontraditional ETFs "are typically not suitable" for investors who plan to hold them for "more than one trading session" and especially in "volatile markets."

FINRA further alleged the representatives did not have an "adequate and reasonable basis" for the nontraditional ETF recommendations, in part, because Edward Jones at the time allowed its brokers to recommend nontraditional ETFs to customers without first conducting reasonable due diligence.

Regulators also found that Edward Jones did not adequately train or otherwise educate its brokers regarding leveraged and inverse ETFs, including the difference between these and traditional ETFs.

If you have invested with Edward D. Jones & Co., one of its brokers or with any firm or financial adviser whose unsuitable or otherwise inappropriate recommendations have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881.

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