Edward Jones agreed Thursday to pay the Securities and Exchange Commission more than $20 million to settle charges that the firm and the former head of its municipal underwriting desk overcharged customers in new municipal bond sales.
The charges against the St. Louis-based brokerage firm come in the first case the SEC has levied against an underwriter for pricing-related fraud in the primary market for municipal securities.
The more than $20 million fine includes nearly $5.2 million in disgorgement and prejudgment interest that will be distributed to current and former customers who were overcharged for the bonds.
Stina Wishman, Edward Jones’ former municipal underwriting desk head, agreed to pay $15,000 and will be barred from working in the securities industry for at least two years.
Both Edward Jones and Wishman consented to the SEC order without admitting or denying the findings.
“Edward Jones undermined the integrity of the bond underwriting process by overcharging retail customers by at least $4.6 million and by misleading municipal issuers,” said Andrew Ceresney, director of the SEC Enforcement Division, in a statement announcing the fines. “This enforcement action, which is the first of its kind, reflects our commitment to addressing abuses in all areas of the municipal bond market.”
Municipal bond underwriters are required to offer new bonds to their customers at what is known as the “initial offering price,” which is negotiated with the issuer of the bonds.