Brokers have a responsibility to act in the best interests of their clients. By acting in good faith and understanding the client’s needs, they can make proper recommendations to protect their client’s investments—and their own reputation.
This duty of loyalty to the client is one of the most important aspects of a broker’s role. Recently, that loyalty came into question in several complaints against Edward Jones.
Infringing loyalty and under-reporting, or paperwork issues?
FINRA fined Edward Jones, one of the largest brokerage firms in the country, for under-reporting damages in 79 customer complaints. The firm reported only $5,000 in damages for many of these complaints. Yet, some complaints listed more than $90,000 in damages.
The difference between the damages claimed and the damages reported is staggering. However, this significant mistake may have been due to confusion surrounding paperwork.
What to know about Form U4 filings
The primary issue in the recent Edward Jones settlement revolved around the firm’s improper filing of Form U4s. Brokers must file a U4 for many reasons, such as:
- The customer’s address changes
- The customer faces criminal charges
- The customer and broker engage in arbitration
- The customer files for bankruptcy
However, it is also necessary to file a U4 if a client files a complaint. According to Investment News, associates at Edward Jones did not file the U4s or report the damages correctly. Because of this, FINRA censured the firm and fined them $40,000.
Correctly filing U4s is not only meant to ensure good faith with the client but also to protect the firm. Mistakes happen, but they have significant penalties in the financial world that can put firms at risk.