Edward Jones settles 401(k) lawsuit for $3.2 million

Plaintiffs alleged the brokerage predominantly used funds in its 401(k) plan that furthered its own business interests at the expense of employees

Dec 13, 2018 @ 4:34 pm

By Greg Iacurci

Edward Jones will pay $3.2 million to settle a lawsuit alleging the firm enriched itself at the expense of employees through mismanagement of its company 401(k) plan.

The lawsuit, which was filed in August 2016, claimed the brokerage firm stacked its retirement plan with certain investment options in order to further its business ties with those fund companies, instead of prudently selecting other funds that were less expensive.

Plaintiffs alleged many of the mutual funds were managed by the brokerage firm's "partners" and "preferred partners" — fund managers that worked closely with Edward Jones brokers and agents and paid revenue sharing to the firm based on marketing the funds to Edward Jones clients.

At least 40 of the plan's 53 investment options are managed by the partners or preferred partners, the lawsuit alleged.

John Boul, an Edward Jones spokesman, said the firm has always believed the claims to be without merit.

"We're pleased this matter has been resolved, avoiding the additional time and expense required to defend our position in a trial," Mr. Boul said.

He pointed out that the settlement agreement, filed Dec. 11 in the U.S. District Court for the Eastern District of Missouri, doesn't require any changes to be made to the company 401(k) plan. The settlement, which must be approved by the court, covers participants in the plan from January 2010 to the present.

The lawsuit, Valeska Schultz et al vs. Edward D. Jones & Co. L.P. et al, is one of several filed against financial services firms in the past few years for allegedly self-dealing in their 401(k) plans. The lawsuits have primarily targeted active fund managers that have loaded their retirement plans with in-house investments.

The bulk have resulted in settlements. Branch Banking & Trust Co. agreed to a $24 million settlement — among the largest to date — in late November.

The Edward Jones lawsuit was originally named Charlene F. McDonald v. Edward D. Jones & Co. L.P. et al, but changed after plaintiffs filed a consolidated complaint in February 2017.


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