August 13, 2015

Brokerage firm Edward Jones and the former head of its municipal underwriting desk, Stina Wishman, agreed to settle charges that they overcharged customers in new municipal bonds sales.  This was the SEC’s first case against an underwriter for pricing-related fraud in the primary market for municipal securities.  The SEC’s investigation found that rather than offering customers municipal bonds at their “initial offering price,” Edward Jones and Wishman improperly offered the bonds at higher prices.  This resulted in customers being overcharged by at least $4.6 million.  The SEC also charged Edward Jones with failing to properly supervise dealer markups on secondary market trades that involved the firm purchasing municipal bonds from customers, placing them into its inventory, and selling them to other customers.  The SEC found that Edward Jones’ supervisory system was not designed to monitor whether the markups on these trades were reasonable.  Edward Jones will pay more than $20 million to settle the SEC’s charges, including nearly $5.2 million in disgorgement and prejudgment interest that will be distributed to customers who were overcharged.  SEC

Tagged in: Regulatory Violations, Securities Fraud,