After reporting that it accidentally overcharged clients by $3.6 million, brokerage firm Edward Jones Canada is being sanctioned in a settlement with the Canadian Investment Regulatory Organization (CIRO).
A CIRO hearing panel approved a proposed settlement with Edward Jones, in which the firm admitted to supervisory shortcomings and internal control failures that resulted in it overcharging 10,000 clients between September 2010 and August 2024, generating excess fees of $3.6 million.
According to the settlement, in May 2024, the firm self-reported an issue that resulted in managed account clients not receiving certain fee reductions and discounts to which they were entitled. The issue impacted 5,400 clients, who were overcharged a combined $2.5 million.
That issue was discovered when Edward Jones was in the process of shifting from an external portfolio manager that administered its managed accounts to an in-house platform. An internal investigation revealed that the errors were caused by the data it submitted to the third-party portfolio manager.
Then, in August, the firm discovered a second, similar issue in its non-managed accounts that resulted in 4,700 clients not receiving fee discounts, amounting to $1.1 million in excess fees.
That issue occurred in cases where clients’ addresses were not entered in the firm’s system uniformly, resulting in the system “not grouping the client’s accounts together for fee reduction purposes.”
In total, the firm has paid over $4.6 million in compensation to harmed clients, and former clients — including interest and opportunity cost compensation on top of refunding the excess fees.
It also clawed back almost $500,000 from 276 financial advisors, representing their share of the overcharged fees, the settlement noted. And, it made changes to its systems to fix these issues.
“[The firm] voluntarily reported the overcharging of fees issues to CIRO and has made diligent efforts to remediate the issue by compensating clients and implementing new internal protocols which ensure that the appropriate fees are charged,” the settlement said.
As part of the settlement with regulators, the firm agreed to pay a fine of $122,500 and costs of $5,000.
By self-reporting and voluntarily remediating the issue, the firm qualified for a 30% reduction on the fine that CIRO would have sought in this case, the settlement noted.