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Edward Jones Files to Dismiss Suit Alleging Reverse Churning

December 4, 2018

Edward Jones is arguing for the dismissal of a lawsuit accusing the firm of pushing low-trading clients into fee-based accounts that end up costing them more, according to news reports.

Jones’ lawyers say the firm had “clear and robust written disclosures” stating that fee-based accounts could be more expensive than commission-based ones, according to the motion to dismiss the suit filed in the federal U.S. Eastern District Court of California, AdvisorHub writes. The company further argues that the plaintiffs in the purported class-action suit, filed earlier this year, failed to show how Edward Jones said anything untrue or misleading, Meryl Young, Jones’ lawyer at Gibson, Dunn & Crutcher, wrote in the motion to dismiss the suit cited by the industry news website.

Some lawyers, speaking at a recent New York State Bar Association conference on arbitration, say the California court, seen as particularly investor-friendly, is still unlikely to grant class action status to the suit given the wide disparities among Edward Jones’ clients in the suit, AdvisorHub writes. Nonetheless, some attorneys also question whether disclosure of fees should be enough to get such suits dismissed, according to the website.

“I question whether the move to fee-based accounts by the industry was done to benefit customers,” said Robert Pearl, an employment and plaintiffs’ lawyer based in Naples, Fla., according to AdvisorHub. “What strikes me is that [Jones’ lawyers] argue full disclosure.”

Edward Jones’ asset-based fees made up $17.2 billion in revenue from March 30, 2013 through March 2019, according to an amended complaint filed by the plaintiffs in the suit in September, the website writes.

Edward Jones HQ, St. Louis (pic credit: Jim Wolfe)

The firm also had $360 billion of its clients’ assets in fee-based accounts as of the end of the third quarter, a 24% increase from the year prior, according to AdvisorHub.

New assets reached $16 billion in the third quarter -- a 78% rise over the same quarter last year -- and the bulk of it was in fee-based accounts, the website writes.

By Alex Padalka
  • To read the AdvisorHub article cited in this story, click here.