U.S. securities regulators say St. Louis-based brokerage firm Edward Jones has agreed to pay more than US$20 million to settle claims that it overcharged retail clients in municipal bond underwritings.

The U.S. Securities and Exchange Commission (SEC) said Thursday that its investigation found that instead of offering new issues of bonds to customers at the initial offering price, Edward Jones and the former head of its municipal underwriting desk, Stina Wishman, took new bonds into the firm’s own inventory and then improperly offered them to customers at higher prices.

In other instances, the firm didn’t offer the bonds to its clients until after trading commenced in the secondary market, and then offered the bonds at higher prices, the SEC says.

As a result, firm’s clients paid at least US$4.6 million more than they should have for new bonds, the SEC found.

Edward Jones agreed to settle the case, without admitting or denying the SEC’s findings.

Nearly US$5.2 million in disgorgement and prejudgment interest that will be distributed to clients who were overcharged for the bonds, the SEC says.

Wishman consented to a separate SEC order, also without admitting or denying the SEC’s findings, agreeing to pay US$15,000 and to be barred from working in the securities industry for at least two years.

“Edward Jones undermined the integrity of the bond underwriting process by overcharging retail customers by at least US$4.6 million and by misleading municipal issuers,” says Andrew Ceresney, director of the SEC enforcement division, in a statement. “This enforcement action, which is the first of its kind, reflects our commitment to addressing abuses in all areas of the municipal bond market.”

The brokerage firm has undertaken a number of remedial efforts and now discloses the percentage and dollar amount of markups on all fixed income retail order trade confirmations in principal transactions, the SEC notes.