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Edward Jones Self-Dealing Lawsuit

A federal district court has rejected the motion to dismiss the claim of Edward Jones favoring its proprietary investments and ‘“preferred partners”’ investments in its 401(k) plan, regardless of fund performance, to the disadvantage of plan participants. This is the second denial for dismissal issued. Defendants, which include Edward D. Jones & Co., L.P., the Edward Jones Profit Sharing 401(k) Administrative Committee and its members, and the Edward Jones Investment and Education Committee and individual fiduciaries serving the Plan, are also alleged to have caused the Plan to incur excessive recordkeeping and administration fees, paid to Mercer HR Services, Inc., the plan’s recordkeeper. Defendants argued that the plaintiffs claim of excessively expensive proprietary funds alone without additional facts that would prove that the fiduciary decision was based on financial interest or suggestion that the selection of higher cost proprietary funds was the result of “flawed decision making” would be not be plausible and grounds for dismissal. However, the judge pointed to Mercer’s fees almost doubling during the class period, the total weighted average expense ratio of the Plan as excessive compared to “market rates”, and the defendants’ failure to prudently monitor and control compensation to Mercer given the services provided. Also noted was the defendant’s revenue sharing distribution policy of payment to the Plan which was not instituted until 2016. The judge ruled that the facts are sufficient to “raise an inference of disloyalty and imprudence.”

www.planadviser.com; March 30, 2018.