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NYSE Disciplines Firm for CD Sales to Seniors

Wed, 12/20/2000 - 1:00am — Karen Stevenson
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The New York Stock Exchange (NYSE) has taken disciplinary actions against one member firm and 23 individuals for violations of NYSE rules and federal securities laws. The cases, prosecuted by the NYSE Division of Enforcement, may be subject to review by the Securities and Exchange Commission and, thereafter, federal courts.

Edward D. Jones & Co., L.P. of St. Louis, Mo., a member firm, consented without admitting or denying guilt to findings that the firm failed to reasonably supervise and control the business activities of the firm and its employees with respect to the sale of callable CDs, among other violations. About 104 customers who bought the CDs from Edward Jones registered complaints ranging from being misinformed about the possible fluctuating market value of the CDs and the length of their maturity, the NYSE said. About 80 percent of the complainants were older than 65 during the period the CDs were sold from October 1994 to June 1997.

An NYSE hearing panel found that, during the period from approximately October 1994-June 1997, the firm failed to properly supervise the recommendation and sale of callable CDs by approximately 87 registered representatives to approximately 104 customers. The panel found that, in certain instances, the registered representatives did not adequately disclose the features and risks of the investment to customers and that the firm did not institute reasonable safeguards or follow-up procedures to ensure that those registered representatives understood and properly informed customers of the features of callable CDs including the call, reinvestment and market risks associated with the product. The panel also found that certain registered representatives sold callable CDs to some of the customers without having had any specific training and supervision regarding the sale of the product and the product features.

The hearing panel also found that the recommendation and sale of callable CDs by the firm to some of the customers was unsuitable in view of the customers' age, investment objectives and/or financial resources and that the firm also made misrepresentations to some of the customers and/or omitted to disclose certain facts in connection with the solicitation and/or sale of callable CDs to the customers (e.g., facts concerning the length of maturity, the call feature and the fluctuation of the callable CDs' market values).

The Securities and Exchange Commission said it has received more than 300 complaints related to CDs, five times more than last year, according to a report in the Wall Street Journal. The SEC is investigating 33 brokerages, including Edward Jones, A.G. Edwards Inc., Merrill Lynch & Co., Morgan Stanley Dean Witter & Co., PaineWebber, Prudential Securities, Salomon Smith Barney and Raymond James & Associates Inc., the paper said.

The New York Stock Exchange (NYSE) has taken disciplinary actions against one member firm and 23 individuals for violations of NYSE rules and federal securities laws. The cases, prosecuted by the NYSE Division of Enforcement, may be subject to review by the Securities and Exchange Commission and, thereafter, federal courts.

Edward D. Jones & Co., L.P. of St. Louis, Mo., a member firm, consented without admitting or denying guilt to findings that the firm failed to reasonably supervise and control the business activities of the firm and its employees with respect to the sale of callable CDs, among other violations. About 104 customers who bought the CDs from Edward Jones registered complaints ranging from being misinformed about the possible fluctuating market value of the CDs and the length of their maturity, the NYSE said. About 80 percent of the complainants were older than 65 during the period the CDs were sold from October 1994 to June 1997.

An NYSE hearing panel found that, during the period from approximately October 1994-June 1997, the firm failed to properly supervise the recommendation and sale of callable CDs by approximately 87 registered representatives to approximately 104 customers. The panel found that, in certain instances, the registered representatives did not adequately disclose the features and risks of the investment to customers and that the firm did not institute reasonable safeguards or follow-up procedures to ensure that those registered representatives understood and properly informed customers of the features of callable CDs including the call, reinvestment and market risks associated with the product. The panel also found that certain registered representatives sold callable CDs to some of the customers without having had any specific training and supervision regarding the sale of the product and the product features.

The hearing panel also found that the recommendation and sale of callable CDs by the firm to some of the customers was unsuitable in view of the customers' age, investment objectives and/or financial resources and that the firm also made misrepresentations to some of the customers and/or omitted to disclose certain facts in connection with the solicitation and/or sale of callable CDs to the customers (e.g., facts concerning the length of maturity, the call feature and the fluctuation of the callable CDs' market values).

The Securities and Exchange Commission said it has received more than 300 complaints related to CDs, five times more than last year, according to a report in the Wall Street Journal. The SEC is investigating 33 brokerages, including Edward Jones, A.G. Edwards Inc., Merrill Lynch & Co., Morgan Stanley Dean Witter & Co., PaineWebber, Prudential Securities, Salomon Smith Barney and Raymond James & Associates Inc., the paper said.