Edward Jones brokerage sued for fraud

LOS ANGELES — California filed a lawsuit Monday accusing the brokerage house Edward D. Jones & Co. of accepting $300 million in improper payments to push its clients toward certain mutual funds.

The announcement came the same day Edward Jones agreed to a $75 million settlement with federal prosecutors in Missouri over allegations related to the company’s mutual fund sales practices. The company has also made a settlement offer to the Securities and Exchange Commission, the New York Stock Exchange and other regulators, it said in a statement.

California Attorney General Bill Lockyer refused to participate in the settlement and said investors in his state deserved a larger payout.

The lawsuit claims St. Louis-based Edward Jones instituted a policy in 2000 in which brokers would receive commissions, contest points and vacations as incentives for selling certain funds. The mutual fund companies, in return, paid the firm for preferential treatment.

Such fees are legal, but the arrangements must be properly disclosed. Lockyer said the brokerage firm failed to tell investors of the deal.

A spokeswoman, Regina DeLuca-Imral, said the firm “intends to vigorously defend itself from the charges brought by the California attorney general.”

California’s lawsuit demands Edward Jones surrender the $300 million in improper payments and pay restitution and damages to clients, as well as up to $25,000 in fines for each violation of state securities Law.