An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel approved a settlement agreement between IIROC staff and Mississauga, Ont.-based Edward Jones that will see the firm pay a $250,000 fine and $50,000 in costs after it admitted to supervisory failings involving several financial advisors.
The brokerage firm admitted that it “did not meet the minimum standards for retail account supervision in five cases” from 2008 to March 2013, according to the settlement.
The issue came to light after IIROC brought disciplinary cases against several Edward Jones advisors, revealing “similar issues,” including unsuitable investment recommendations, which, in turn, revealed inadequate oversight of the advisors’ activities by the firm’s supervisory personnel.
For example, the settlement indicates that Edward Jones did not adequately question whether advisors were properly reporting know-your-client (KYC) information, including instances of advisors recording increases in client risk tolerance and investment knowledge shortly after opening accounts.
In addition, the firm did not sufficiently question whether trades were suitable for certain clients, the settlement states: “Edward Jones treated the queries as satisfied when the KYC information of the clients was updated. … In the specific instance of those cases, the supervision queries were insufficient.”
Edward Jones launched a comprehensive review of its supervisory procedures with an external consultant after the supervisory issues were revealed. This, in turn, has led the firm to bolster those procedures. According to the settlement, the firm has spent more than $4 million strengthening these systems since 2013.
“Edward Jones has improved and enhanced its procedures and tools for trade reviews, with the addition of several new tools and enhanced systems to better assist [field supervisors] in identifying patterns and isolated issues,” the settlement says.
In addition, the firm has also improved its escalation procedures and supervision policies as well as increased compliance staffing, the settlement states.
Edward Jones has terminated the advisors involved in the misconduct, the settlement states, adding that “most of the affected clients have either accepted compensation for their losses or are in the process of doing so.”
The firm fully co-operated with IIROC’s investigation, has no prior disciplinary history and there was no element of deceit on its part, the settlement states.
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