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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 27, 2024

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

Commission file number 0-16633

 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

(Exact name of registrant as specified in its Charter)

 

 

Missouri

43-1450818

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

12555 Manchester Road

Des Peres, Missouri 63131

(Address of principal executive office) (Zip Code)

(314) 515-2000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

N/A

N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 25, 2024, 1,734,516 units of limited partnership interest (“Interests”) are outstanding, each representing $1,000 of limited partner capital. There is no public or private market for such Interests.


 

THE JONES FINANCIAL COMPANIES, L.L.L.P.

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

 

 

Consolidated Statements of Financial Condition

 

3

 

 

Consolidated Statements of Income

 

4

 

 

Consolidated Statements of Comprehensive Income (Loss)

 

5

 

 

Consolidated Statements of Changes in Partnership Capital and Profits Interests - Sept. 27, 2024

 

6

 

 

Consolidated Statements of Changes in Partnership Capital - Sept. 29, 2023

 

7

 

 

Consolidated Statements of Cash Flows

 

8

 

 

Notes to Consolidated Financial Statements

 

9

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

33

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

33

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

34

 

 

 

 

 

Item 1A.

 

Risk Factors

 

34

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

34

 

 

 

 

 

Item 6.

 

Exhibits

 

35

 

 

 

 

 

 

 

Signatures

 

38

 

 

 

2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

(Dollars in millions)

 

September 27, 2024

 

 

December 31, 2023

 

ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,944

 

 

$

1,645

 

Cash and investments, at fair value, segregated under federal regulations

 

 

13,246

 

 

 

15,565

 

Securities purchased under agreements to resell

 

 

736

 

 

 

1,139

 

Receivables from:

 

 

 

 

 

 

Clients

 

 

4,199

 

 

 

3,922

 

Mutual funds, insurance companies and other

 

 

935

 

 

 

891

 

Brokers, dealers and clearing organizations

 

 

347

 

 

 

429

 

Securities owned, at fair value:

 

 

 

 

 

 

Investment securities

 

 

1,379

 

 

 

1,069

 

Inventory securities

 

 

214

 

 

 

88

 

Fixed assets, at cost, net of accumulated depreciation and amortization

 

 

1,289

 

 

 

1,093

 

Lease right-of-use assets

 

 

1,075

 

 

 

1,029

 

Other assets

 

 

1,217

 

 

 

1,133

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

26,581

 

 

$

28,003

 

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

Payables to:

 

 

 

 

 

 

Clients

 

$

16,319

 

 

$

18,246

 

Brokers, dealers and clearing organizations

 

 

218

 

 

 

131

 

Accrued compensation and employee benefits

 

 

2,808

 

 

 

2,506

 

Accounts payable, accrued expenses and other

 

 

1,359

 

 

 

1,427

 

Lease liabilities

 

 

1,108

 

 

 

1,066

 

 

 

 

21,812

 

 

 

23,376

 

Contingencies (Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

Partnership capital subject to mandatory redemption, net of reserve for
   anticipated withdrawals and partnership loans:

 

 

 

 

 

 

Limited partners

 

 

1,737

 

 

 

1,750

 

Subordinated limited partners

 

 

718

 

 

 

666

 

General partners

 

 

1,886

 

 

 

1,633

 

Total

 

 

4,341

 

 

 

4,049

 

Reserve for anticipated withdrawals

 

 

428

 

 

 

578

 

Total partnership capital and profits interests subject to mandatory redemption

 

 

4,769

 

 

 

4,627

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

$

26,581

 

 

$

28,003

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

3


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

(Dollars in millions, except per unit information and units outstanding)

 

September 27, 2024

 

 

September 29, 2023

 

 

September 27, 2024

 

 

September 29, 2023

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

3,184

 

 

$

2,708

 

 

$

9,103

 

 

$

7,809

 

Account and activity

 

 

185

 

 

 

186

 

 

 

564

 

 

 

562

 

Total fee revenue

 

 

3,369

 

 

 

2,894

 

 

 

9,667

 

 

 

8,371

 

Trade revenue

 

 

442

 

 

 

359

 

 

 

1,299

 

 

 

1,044

 

Interest and dividends

 

 

294

 

 

 

292

 

 

 

904

 

 

 

851

 

Other revenue, net

 

 

83

 

 

 

15

 

 

 

149

 

 

 

99

 

Total revenue

 

 

4,188

 

 

 

3,560

 

 

 

12,019

 

 

 

10,365

 

Interest expense

 

 

65

 

 

 

67

 

 

 

199

 

 

 

213

 

Net revenue

 

 

4,123

 

 

 

3,493

 

 

 

11,820

 

 

 

10,152

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

2,822

 

 

 

2,358

 

 

 

8,160

 

 

 

6,923

 

Communications and data processing

 

 

243

 

 

 

239

 

 

 

739

 

 

 

668

 

Occupancy and equipment

 

 

159

 

 

 

155

 

 

 

475

 

 

 

461

 

Fund sub-adviser fees

 

 

81

 

 

 

70

 

 

 

233

 

 

 

201

 

Professional and consulting fees

 

 

47

 

 

 

47

 

 

 

137

 

 

 

130

 

Advertising

 

 

38

 

 

 

40

 

 

 

118

 

 

 

107

 

Other operating expenses

 

 

174

 

 

 

190

 

 

 

462

 

 

 

457

 

Total operating expenses

 

 

3,564

 

 

 

3,099

 

 

 

10,324

 

 

 

8,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before allocations to partners

 

 

559

 

 

 

394

 

 

 

1,496

 

 

 

1,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocations to partners:

 

 

 

 

 

 

 

 

 

 

 

 

Limited partners

 

 

85

 

 

 

66

 

 

 

232

 

 

 

203

 

Profits interests

 

 

12

 

 

 

 

 

 

32

 

 

 

 

Subordinated limited partners

 

 

61

 

 

 

44

 

 

 

164

 

 

 

135

 

General partners

 

 

401

 

 

 

284

 

 

 

1,068

 

 

 

867

 

Net income

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income allocated to limited partners per weighted average
   $
1,000 equivalent limited partnership unit outstanding

 

$

46.42

 

 

$

35.54

 

 

$

123.83

 

 

$

108.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average $1,000 equivalent limited partnership
   units outstanding

 

 

1,738,470

 

 

 

1,760,636

 

 

 

1,744,585

 

 

 

1,767,944

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

4


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

(Dollars in millions)

 

September 27, 2024

 

 

September 29, 2023

 

 

September 27, 2024

 

 

September 29, 2023

 

Net income

 

$

 

 

$

 

 

$

 

 

$

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

1

 

 

 

 

 

 

(2

)

 

 

 

Comprehensive income (loss) before allocations to partners

 

 

1

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocations to partners

 

 

1

 

 

 

 

 

 

(2

)

 

 

 

Total comprehensive income (loss)

 

$

 

 

$

 

 

$

 

 

$

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

5


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL AND PROFITS INTERESTS

SUBJECT TO MANDATORY REDEMPTION

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 27, 2024

(Unaudited)

 

(Dollars in millions)

 

Limited
Partnership
Capital

 

 

Profits
Interests

 

 

Subordinated
Limited
Partnership
Capital

 

 

General
Partnership
Capital

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL PARTNERSHIP CAPITAL SUBJECT TO MANDATORY
   REDEMPTION, DECEMBER 31, 2023

 

$

1,920

 

 

$

 

 

$

726

 

 

$

1,981

 

 

$

4,627

 

Reserve for anticipated withdrawals

 

 

(170

)

 

 

 

 

 

(60

)

 

 

(348

)

 

 

(578

)

Partnership capital subject to mandatory redemption, net of
   reserve for anticipated withdrawals, December 31, 2023

 

$

1,750

 

 

$

 

 

$

666

 

 

$

1,633

 

 

$

4,049

 

Partnership loans outstanding, December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

439

 

 

 

439

 

Total partnership capital, including capital financed with
   partnership loans, net of reserve for anticipated withdrawals,
   December 31, 2023

 

 

1,750

 

 

 

 

 

 

666

 

 

 

2,072

 

 

 

4,488

 

Issuance of partnership interests

 

 

6

 

 

 

 

 

 

64

 

 

 

267

 

 

 

337

 

Redemption of partnership interests

 

 

(7

)

 

 

 

 

 

(11

)

 

 

(46

)

 

 

(64

)

Net income allocations

 

 

74

 

 

 

10

 

 

 

52

 

 

 

331

 

 

 

467

 

Other comprehensive loss allocations

 

 

(1

)

 

 

 

 

 

 

 

 

(2

)

 

 

(3

)

Distributions

 

 

4

 

 

 

 

 

 

 

 

 

(25

)

 

 

(21

)

Total partnership capital, including capital financed with
  partnership loans, and profits interests, March 29, 2024

 

 

1,826

 

 

 

10

 

 

 

771

 

 

 

2,597

 

 

 

5,204

 

Issuance of partnership interests

 

 

1

 

 

 

 

 

 

 

 

 

3

 

 

 

4

 

Redemption of partnership interests

 

 

(6

)

 

 

 

 

 

 

 

 

(10

)

 

 

(16

)

Net income allocations

 

 

73

 

 

 

10

 

 

 

51

 

 

 

336

 

 

 

470

 

Distributions

 

 

(19

)

 

 

(17

)

 

 

(85

)

 

 

(409

)

 

 

(530

)

Total partnership capital, including capital financed with
  partnership loans, and profits interests, June 28, 2024

 

 

1,875

 

 

 

3

 

 

 

737

 

 

 

2,517

 

 

 

5,132

 

Issuance of partnership interests

 

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

2

 

Redemption of partnership interests

 

 

(7

)

 

 

 

 

 

(2

)

 

 

(34

)

 

 

(43

)

Net income allocations

 

 

85

 

 

 

12

 

 

 

61

 

 

 

401

 

 

 

559

 

Other comprehensive loss allocations

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Distributions

 

 

(2

)

 

 

(11

)

 

 

(58

)

 

 

(297

)

 

 

(368

)

Total partnership capital, including capital financed with
  partnership loans, and profits interests, September 27, 2024

 

 

1,951

 

 

 

4

 

 

 

739

 

 

 

2,589

 

 

 

5,283

 

Partnership loans outstanding, September 27, 2024

 

 

 

 

 

 

 

 

 

 

 

(514

)

 

 

(514

)

TOTAL PARTNERSHIP CAPITAL AND PROFITS INTERESTS
   SUBJECT TO MANDATORY REDEMPTION,
   SEPTEMBER 27, 2024

 

$

1,951

 

 

$

4

 

 

$

739

 

 

$

2,075

 

 

$

4,769

 

Reserve for anticipated withdrawals

 

 

(214

)

 

 

(4

)

 

 

(21

)

 

 

(189

)

 

 

(428

)

Partnership capital subject to mandatory redemption, net of
   reserve for anticipated withdrawals, September 27, 2024

 

$

1,737

 

 

$

 

 

$

718

 

 

$

1,886

 

 

$

4,341

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

6


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL

SUBJECT TO MANDATORY REDEMPTION

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 29, 2023

(Unaudited)

 

(Dollars in millions)

 

Limited
Partnership
Capital

 

 

Subordinated
Limited
Partnership
Capital

 

 

General
Partnership
Capital

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL PARTNERSHIP CAPITAL SUBJECT TO MANDATORY
   REDEMPTION, DECEMBER 31, 2022

 

$

1,312

 

 

$

671

 

 

$

1,836

 

 

$

3,819

 

Reserve for anticipated withdrawals

 

 

(100

)

 

 

(53

)

 

 

(311

)

 

 

(464

)

Partnership capital subject to mandatory redemption, net of
  reserve for anticipated withdrawals, December 31, 2022

 

$

1,212

 

 

$

618

 

 

$

1,525

 

 

$

3,355

 

Partnership loans outstanding, December 31, 2022

 

 

 

 

 

 

 

 

335

 

 

 

335

 

Total partnership capital, including capital financed with partnership
  loans, net of reserve for anticipated withdrawals, December 31, 2022

 

 

1,212

 

 

 

618

 

 

 

1,860

 

 

 

3,690

 

Issuance of partnership interests

 

 

568

 

 

 

65

 

 

 

312

 

 

 

945

 

Redemption of partnership interests

 

 

(7

)

 

 

(14

)

 

 

(71

)

 

 

(92

)

Net income allocated to partners

 

 

68

 

 

 

45

 

 

 

288

 

 

 

401

 

Distributions

 

 

(2

)

 

 

 

 

 

(20

)

 

 

(22

)

Total partnership capital, including capital financed with partnership
  loans, March 31, 2023

 

 

1,839

 

 

 

714

 

 

 

2,369

 

 

 

4,922

 

Issuance of partnership interests

 

 

 

 

 

2

 

 

 

6

 

 

 

8

 

Redemption of partnership interests

 

 

(7

)

 

 

(1

)

 

 

(16

)

 

 

(24

)

Net income allocated to partners

 

 

69

 

 

 

46

 

 

 

295

 

 

 

410

 

Distributions

 

 

(9

)

 

 

(75

)

 

 

(358

)

 

 

(442

)

Total partnership capital, including capital financed with partnership
  loans, June 30, 2023

 

 

1,892

 

 

 

686

 

 

 

2,296

 

 

 

4,874

 

Issuance of partnership interests

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Redemption of partnership interests

 

 

(8

)

 

 

(6

)

 

 

(38

)

 

 

(52

)

Net income allocated to partners

 

 

66

 

 

 

44

 

 

 

284

 

 

 

394

 

Distributions

 

 

(2

)

 

 

(46

)

 

 

(232

)

 

 

(280

)

Total partnership capital, including capital financed with
  partnership loans, September 29, 2023

 

 

1,948

 

 

 

681

 

 

 

2,310

 

 

 

4,939

 

Partnership loans outstanding, September 29, 2023

 

 

 

 

 

 

 

 

(464

)

 

 

(464

)

TOTAL PARTNERSHIP CAPITAL SUBJECT TO MANDATORY
   REDEMPTION, SEPTEMBER 29, 2023

 

$

1,948

 

 

$

681

 

 

$

1,846

 

 

$

4,475

 

Reserve for anticipated withdrawals

 

 

(190

)

 

 

(14

)

 

 

(137

)

 

 

(341

)

Partnership capital subject to mandatory redemption, net of
   reserve for anticipated withdrawals, September 29, 2023

 

$

1,758

 

 

$

667

 

 

$

1,709

 

 

$

4,134

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

7


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

 

(Dollars in millions)

 

September 27, 2024

 

 

September 29, 2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

 

 

$

 

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

 

Income before allocations to partners

 

 

1,496

 

 

 

1,205

 

Foreign currency translation

 

 

(2

)

 

 

 

Depreciation and amortization

 

 

451

 

 

 

414

 

 

 

 

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Investments segregated under federal regulations

 

 

2,355

 

 

 

1,134

 

Securities purchased under agreements to resell

 

 

403

 

 

 

(917

)

Net payable to clients

 

 

(2,204

)

 

 

(3,185

)

Net receivable from brokers, dealers and clearing organizations

 

 

169

 

 

 

(111

)

Receivable from mutual funds, insurance companies and other

 

 

(44

)

 

 

(3

)

Securities owned

 

 

(436

)

 

 

52

 

Other assets

 

 

(87

)

 

 

(56

)

Lease liabilities

 

 

(261

)

 

 

(253

)

Accrued compensation and employee benefits

 

 

302

 

 

 

111

 

Accounts payable, accrued expenses and other

 

 

(65

)

 

 

(40

)

Net cash provided by (used in) operating activities

 

 

2,077

 

 

 

(1,649

)

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchase of fixed assets

 

 

(390

)

 

 

(307

)

Cash used in investing activities

 

 

(390

)

 

 

(307

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Repayment of partnership loans

 

 

42

 

 

 

58

 

Issuance of partnership interests

 

 

73

 

 

 

638

 

Redemption of partnership interests

 

 

(123

)

 

 

(168

)

Distributions from partnership capital

 

 

(1,344

)

 

 

(1,077

)

Net cash used in financing activities

 

 

(1,352

)

 

 

(549

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

335

 

 

 

(2,505

)

 

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

 

 

 

 

 

 

Beginning of period

 

 

5,817

 

 

 

8,382

 

End of period

 

$

6,152

 

 

$

5,877

 

 

See Note 10 for additional cash flow information.

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

8


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in millions)

 

 

NOTE 1 – INTRODUCTION AND BASIS OF PRESENTATION

 

The accompanying Consolidated Financial Statements include the accounts of The Jones Financial Companies, L.L.L.P. and all wholly-owned subsidiaries (collectively, the “Partnership” or "JFC"). The financial position of the Partnership’s subsidiaries in Canada as of August 31, 2024 and November 30, 2023 are included in the Partnership’s Consolidated Statements of Financial Condition and the results for the three- and nine-month periods ended August 31, 2024 and 2023 are included in the Partnership’s Consolidated Statements of Income, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Changes in Partnership Capital and Profits Interests Subject to Mandatory Redemption and Consolidated Statements of Cash Flows because of the timing of the Partnership’s financial reporting process.

The Partnership’s principal operating subsidiaries are Edward D. Jones & Co., L.P. (“Edward Jones”), a registered broker-dealer and investment adviser in the United States (“U.S.”), and Edward Jones (an Ontario limited partnership), a registered broker-dealer in Canada ("EJ Canada"). Through these entities, the Partnership primarily serves individual investors in the U.S. and Canada as a retail brokerage business that primarily derives revenues from fees for providing investment advisory and other account services to its clients, fees for assets held by clients and commissions for the distribution of mutual fund shares and insurance products and the purchase or sale of securities. The Partnership conducts business throughout North America through its U.S. and Canada business units with its clients, various brokers, dealers, clearing organizations, depositories and banks. For financial information related to the Partnership’s two operating segments for the three- and nine-month periods ended September 27, 2024 and September 29, 2023, see Note 8 to the Consolidated Financial Statements. Trust services are offered to Edward Jones’ U.S. clients through Edward Jones Trust Company (“Trust Co.”), a wholly-owned subsidiary of the Partnership. Olive Street Investment Advisers, LLC ("Olive Street"), a wholly-owned subsidiary of the Partnership, provides investment advisory services to the Edward Jones Money Market Fund (the "Money Market Fund") and the twelve sub-advised mutual funds comprising the Bridge Builder® Trust.

The Consolidated Financial Statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles, which require the use of certain estimates by management in determining the Partnership’s assets, liabilities, revenues and expenses. Actual results could differ from these estimates. Certain prior period balances have been adjusted to align to current year presentation. The Partnership evaluated subsequent events for recognition or disclosure through the date these Consolidated Financial Statements were issued and identified no matters requiring disclosure other than those disclosed in Note 7.

The interim financial information included herein is unaudited. However, in the opinion of management, such information includes all adjustments, consisting primarily of normal recurring accruals, which are necessary for a fair statement of the results of interim operations. The Partnership evaluated subsequent events for recognition or disclosure through the date these Consolidated Financial Statements were issued and identified no matters requiring disclosure.

The results of operations for the three- and nine-month periods ended September 27, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024. These unaudited Consolidated Financial Statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2023 (the "Annual Report").

There have been no material changes to the Partnership’s significant accounting policies or disclosures of recently issued accounting standards as described in Part II, Item 8 – Financial Statements and Supplementary Data – Note 1 of the Annual Report, other than the modification and addition disclosed below.

9


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

Foreign Exchange. Assets and liabilities denominated in a foreign currency are translated at the exchange rate at the end of the period. Revenue and expenses denominated in a foreign currency are translated using the average exchange rate for each period. Effective January 1, 2024, the functional currency for the Partnership's Canada subsidiaries changed prospectively from U.S. dollars to Canadian dollars due to a change in facts and economic indicators, including sustained profitability in Canada, with no material impact to the Consolidated Financial Statements. As a result, foreign exchange gains and losses from the translation of EJ Canada's financial statements into U.S. dollars are reflected on the Consolidated Statements of Comprehensive Income (Loss). Under the terms of the Partnership’s Twenty-Second Amended and Restated Agreement of Registered Limited Liability Limited Partnership, dated August 15, 2023 (the “Partnership Agreement”), other comprehensive income (loss) is allocated to partners, which results in no accumulated other comprehensive income on the Consolidated Statements of Financial Condition.

Profits Interests. Effective January 1, 2024, the Partnership began issuing Profits Interests to certain financial advisors in the U.S., to enable them to further share in the Partnership's Net Income, as defined in the Partnership Agreement as income and other comprehensive income (loss) before allocations to partners. Profits Interests do not require a capital investment but, like limited partnership interests ("Interests"), give the holder the right to allocations and distributions of the Partnership's Net Income before allocations to subordinated limited partners and general partners. The amount of Net Income allocated to a Profits Interest holder is based on a bookkeeping measure expressed in terms of a notional U.S. dollar amount ("Notional Capital") held by such Profits Interests holder. Profits Interests have no book value, are not redeemable for any value in the future, and expire upon the earlier of the redemption of the Profits Interest or at the end of their stated term. To the extent the Partnership experiences a Net Loss for a given calendar year, as defined in the Partnership Agreement, Profits Interest holders, like limited partners, would not be allocated such Net Loss. Profits Interests have a maximum three-calendar year term from the date of issuance. Profits Interests are considered mandatorily redeemable under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") No. 480, Distinguishing Liabilities from Equity. Undistributed Partnership Net Income allocations are included in reserve for anticipated withdrawals on the Consolidated Statements of Financial Condition until distributed. The Partnership's Net Income allocations for Profits Interests are disclosed separately on the Consolidated Statements of Income and Consolidated Statements of Changes in Partnership Capital and Profits Interests.

Profits Interests are intended to be granted annually as part of an associate recognition and retention program. The Partnership granted and issued Profits Interests for no cash consideration on January 1, 2024, to provide Profits Interest holders with allocations of Net Income based upon a $263 Notional Capital amount for the 2024 calendar year. The Profits Interests are fully vested and participate in Net Income allocations upon grant. Any future rights to allocations and distributions of the Partnership's Net Income will be forfeited upon termination of the Profits Interest. Profits Interests have zero fair value on grant date, therefore no compensation expense is recognized upon issuance or over their stated term.

 

NOTE 2 – LEASES

For the three- and nine-month periods ended September 27, 2024 and September 29, 2023, respectively, cash paid for amounts included in the measurement of operating lease liabilities was $88 and $261 and $85 and $253, respectively, and lease right-of-use assets obtained in exchange for new operating lease liabilities were $96 and $295 and $117 and $344, respectively. As of September 27, 2024 and December 31, 2023, the weighted-average remaining lease term was four years for both periods and the weighted-average discount rates were 4.1% and 3.7%, respectively.

The following table summarizes the Partnership's operating lease cost, variable lease cost not included in the lease liability and total lease cost for the:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 27, 2024

 

 

September 29, 2023

 

 

September 27, 2024

 

 

September 29, 2023

 

Operating lease cost

 

$

87

 

 

$

85

 

 

$

259

 

 

$

252

 

Variable lease cost

 

 

19

 

 

 

17

 

 

 

54

 

 

 

51

 

Total lease cost

 

$

106

 

 

$

102

 

 

$

313

 

 

$

303

 

 

10


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

The Partnership's future undiscounted cash outflows for operating leases are summarized below as of:

 

September 27, 2024

 

2024

$

88

 

2025

 

331

 

2026

 

278

 

2027

 

216

 

2028

 

151

 

Thereafter

 

163

 

Total lease payments

 

1,227

 

Less: Interest

 

119

 

Total present value of lease liabilities

$

1,108

 

 

While the rights and obligations for leases that have not yet commenced are not significant, the Partnership regularly enters into new branch office leases.

NOTE 3 – RECEIVABLES AND REVENUE

As of September 27, 2024 and December 31, 2023, collateral held for receivables from clients was $4,874 and $4,231, respectively, and collateral held for securities purchased under agreements to resell was $747 and $1,158, respectively. Given the nature of the agreements for receivables from clients and given the counterparties for resale agreements are financial institutions that the Partnership considers to be reputable and reliable, the Partnership does not expect the fair value of collateral to fall below the value of the agreements frequently or for an extended period of time. Therefore, the expected credit loss was zero for each period. Additionally, partnership loan values remained below the value of capital allocated to partners, resulting in an expected credit loss of zero as of September 27, 2024 and December 31, 2023.

As of September 27, 2024, December 31, 2023 and December 31, 2022, $859, $732 and $637, respectively, of the receivable from clients balance and $367, $343 and $328, respectively, of the receivable from mutual funds, insurance companies and other balance related to revenue contracts with customers. The related fees are paid out of client accounts or third-party products consisting of cash and securities, the collateral value of those accounts continues to exceed the amortized cost basis of these receivables and the receivables have a short duration. As a result, the Partnership does not expect an event or change which would result in the receivables being undercollateralized or unpaid. The expected credit loss for receivables from contracts with customers was zero as of September 27, 2024 and December 31, 2023.

 

11


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

The following table shows the Partnership's disaggregated revenue information. See Note 8 for segment information.

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

September 27, 2024

 

 

September 29, 2023

 

 

 

U.S.

 

 

Canada

 

 

Total

 

 

U.S.

 

 

Canada

 

 

Total

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory programs fees

 

$

2,396

 

 

$

49

 

 

$

2,445

 

 

$

1,974

 

 

$

41

 

 

$

2,015

 

Service fees

 

 

385

 

 

 

26

 

 

 

411

 

 

 

352

 

 

 

26

 

 

 

378

 

Cash solutions fees

 

 

141

 

 

 

 

 

 

141

 

 

 

150

 

 

 

 

 

 

150

 

Other asset-based fees

 

 

187

 

 

 

 

 

 

187

 

 

 

165

 

 

 

 

 

 

165

 

Total asset-based fee revenue

 

 

3,109

 

 

 

75

 

 

 

3,184

 

 

 

2,641

 

 

 

67

 

 

 

2,708

 

Account and activity fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder accounting services fees

 

 

116

 

 

 

 

 

 

116

 

 

 

116

 

 

 

 

 

 

116

 

Other account and activity fee revenue

 

 

66

 

 

 

3

 

 

 

69

 

 

 

67

 

 

 

3

 

 

 

70

 

Total account and activity fee revenue

 

 

182

 

 

 

3

 

 

 

185

 

 

 

183

 

 

 

3

 

 

 

186

 

   Total fee revenue

 

 

3,291

 

 

 

78

 

 

 

3,369

 

 

 

2,824

 

 

 

70

 

 

 

2,894

 

Trade revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

 

371

 

 

 

12

 

 

 

383

 

 

 

294

 

 

 

10

 

 

 

304

 

Principal transactions

 

 

56

 

 

 

3

 

 

 

59

 

 

 

52

 

 

 

3

 

 

 

55

 

Total trade revenue

 

 

427

 

 

 

15

 

 

 

442

 

 

 

346

 

 

 

13

 

 

 

359

 

Total revenue from customers

 

 

3,718

 

 

 

93

 

 

 

3,811

 

 

 

3,170

 

 

 

83

 

 

 

3,253

 

Net interest and dividends and other revenue

 

 

296

 

 

 

16

 

 

 

312

 

 

 

224

 

 

 

16

 

 

 

240

 

Net revenue

 

$

4,014

 

 

$

109

 

 

$

4,123

 

 

$

3,394

 

 

$

99

 

 

$

3,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

Nine Months Ended

 

 

 

September 27, 2024

 

 

September 29, 2023

 

 

 

U.S.

 

 

Canada

 

 

Total

 

 

U.S.

 

 

Canada

 

 

Total

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory programs fees

 

$

6,781

 

 

$

139

 

 

$

6,920

 

 

$

5,672

 

 

$

117

 

 

$

5,789

 

Service fees

 

 

1,126

 

 

 

77

 

 

 

1,203

 

 

 

1,032

 

 

 

75

 

 

 

1,107

 

Cash solutions fees

 

 

435

 

 

 

 

 

 

435

 

 

 

428

 

 

 

 

 

 

428

 

Other asset-based fees

 

 

545

 

 

 

 

 

 

545

 

 

 

485

 

 

 

 

 

 

485

 

Total asset-based fee revenue

 

 

8,887

 

 

 

216

 

 

 

9,103

 

 

 

7,617

 

 

 

192

 

 

 

7,809

 

Account and activity fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder accounting services fees

 

 

349

 

 

 

 

 

 

349

 

 

 

346

 

 

 

 

 

 

346

 

Other account and activity fee revenue

 

 

205

 

 

 

10

 

 

 

215

 

 

 

206

 

 

 

10

 

 

 

216

 

Total account and activity fee revenue

 

 

554

 

 

 

10

 

 

 

564

 

 

 

552

 

 

 

10

 

 

 

562

 

   Total fee revenue

 

 

9,441

 

 

 

226

 

 

 

9,667

 

 

 

8,169

 

 

 

202

 

 

 

8,371

 

Trade revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

 

1,092

 

 

 

37

 

 

 

1,129

 

 

 

855

 

 

 

31

 

 

 

886

 

Principal transactions

 

 

161

 

 

 

9

 

 

 

170

 

 

 

151

 

 

 

7

 

 

 

158

 

Total trade revenue

 

 

1,253

 

 

 

46

 

 

 

1,299

 

 

 

1,006

 

 

 

38

 

 

 

1,044

 

Total revenue from customers

 

 

10,694

 

 

 

272

 

 

 

10,966

 

 

 

9,175

 

 

 

240

 

 

 

9,415

 

Net interest and dividends and other revenue

 

 

801

 

 

 

53

 

 

 

854

 

 

 

688

 

 

 

49

 

 

 

737

 

Net revenue

 

$

11,495

 

 

$

325

 

 

$

11,820

 

 

$

9,863

 

 

$

289

 

 

$

10,152

 

 

 

NOTE 4 – FAIR VALUE

The Partnership's valuation methodologies for financial assets and financial liabilities measured at fair value and the fair value hierarchy are described in Part II, Item 8 – Financial Statements and Supplementary Data – Note 1 of the Partnership's Annual Report. There have been no material changes to the Partnership's valuation methodologies since December 31, 2023.

12


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

The Partnership records fractional shares at fair value in other assets with associated liabilities in accounts payable, accrued expenses and other in the Consolidated Statements of Financial Condition. The liabilities are initially recorded at the dollar amount received from the clients, but the Partnership makes an election to record the liabilities at fair value. Changes in the fair value of the assets and liabilities offset in other revenue in the Consolidated Statements of Income, with no impact on income before allocations to partners.

The Partnership did not have any assets or liabilities categorized as Level III during the nine- and twelve-month periods ended September 27, 2024 and December 31, 2023, respectively.

 

The following tables show the Partnership’s financial assets and liabilities measured at fair value as of:

 

 

 

September 27, 2024

 

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

$

 

 

$

163

 

 

$

 

 

$

163

 

Money market funds

 

 

73

 

 

 

 

 

 

 

 

 

73

 

Total cash equivalents

 

$

73

 

 

$

163

 

 

$

 

 

$

236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments segregated under federal regulations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

7,938

 

 

$

 

 

$

 

 

$

7,938

 

Certificates of deposit

 

 

 

 

 

1,100

 

 

 

 

 

 

1,100

 

Total investments segregated under federal regulations

 

$

7,938

 

 

$

1,100

 

 

$

 

 

$

9,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities owned:

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

Government and agency obligations

 

$

895

 

 

$

 

 

$

 

 

$

895

 

Mutual funds(1)

 

 

364

 

 

 

 

 

 

 

 

 

364

 

Certificates of deposit

 

 

 

 

 

100

 

 

 

 

 

 

100

 

Municipal obligations

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Equities

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Total investment securities

 

$

1,267

 

 

$

112

 

 

$

 

 

$

1,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory securities:

 

 

 

 

 

 

 

 

 

 

 

 

Mutual funds

 

$

103

 

 

$

 

 

$

 

 

$

103

 

Municipal obligations

 

 

 

 

 

50

 

 

 

 

 

 

50

 

Equities

 

 

19

 

 

 

 

 

 

 

 

 

19

 

Corporate bonds and notes

 

 

 

 

 

15

 

 

 

 

 

 

15

 

Government and agency obligations

 

 

15

 

 

 

 

 

 

 

 

 

15

 

Certificates of deposit

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Total inventory securities

 

$

137

 

 

$

77

 

 

$

 

 

$

214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

Client fractional share ownership assets

 

$

925

 

 

$

 

 

$

 

 

$

925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other:

 

 

 

 

 

 

 

 

 

 

 

 

Client fractional share redemption obligations

 

$

925

 

 

$

 

 

$

 

 

$

925

 

 

13


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

 

 

 

December 31, 2023

 

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

$

 

 

$

179

 

 

$

 

 

$

179

 

Money market funds

 

 

76

 

 

 

 

 

 

 

 

 

76

 

Total cash equivalents

 

$

76

 

 

$

179

 

 

$

 

 

$

255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments segregated under federal regulations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasuries

 

$

9,893

 

 

$

 

 

$

 

 

$

9,893

 

Certificates of deposit

 

 

 

 

 

1,500

 

 

 

 

 

 

1,500

 

Total investments segregated under federal regulations

 

$

9,893

 

 

$

1,500

 

 

$

 

 

$

11,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities owned:

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

Government and agency obligations

 

$

600

 

 

$

 

 

$

 

 

$

600

 

Mutual funds(1)

 

 

346

 

 

 

 

 

 

 

 

 

346

 

Certificates of deposit

 

 

 

 

 

100

 

 

 

 

 

 

100

 

Municipal obligations

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Equities

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Total investment securities

 

$

957

 

 

$

112

 

 

$

 

 

$

1,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventory securities:

 

 

 

 

 

 

 

 

 

 

 

 

Municipal obligations

 

$

 

 

$

29

 

 

$

 

 

$

29

 

Equities

 

 

21

 

 

 

 

 

 

 

 

 

21

 

Certificates of deposit

 

 

 

 

 

20

 

 

 

 

 

 

20

 

Mutual funds

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Corporate bonds and notes

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Government and agency obligations

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Total inventory securities

 

$

34

 

 

$

54

 

 

$

 

 

$

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

 

Client fractional share ownership assets

 

$

824

 

 

$

 

 

$

 

 

$

824

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other:

 

 

 

 

 

 

 

 

 

 

 

 

Client fractional share redemption obligations

 

$

824

 

 

$

 

 

$

 

 

$

824

 

 

(1)
The mutual funds balance consists primarily of securities held to economically hedge future liabilities for the non-qualified deferred compensation plan. The balance also includes a security held for regulatory purposes at the Trust Co.

 

14


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

NOTE 5 – PARTNERSHIP CAPITAL SUBJECT TO MANDATORY REDEMPTION

The Partnership makes loans available to those general partners and, in limited circumstances, subordinated limited partners (in each case, other than members of the Enterprise Leadership Team ("ELT"), as defined in the Partnership Agreement), who require financing for some or all of their Partnership capital contributions. In limited circumstances a general partner may withdraw from the Partnership and become a subordinated limited partner while they still have an outstanding Partnership loan. It is anticipated that, of the future general and subordinated limited partnership capital contributions (in each case, other than for ELT members) requiring financing, the majority will be financed through Partnership loans. Loans made by the Partnership to such partners are generally for a period of one year but are expected to be renewed and bear interest at the greater of the Prime Rate for the last business day of the prior fiscal month or 3.25% per annum. The Partnership recognizes interest income for the interest earned related to these loans. The outstanding amount of Partnership loans is reflected as a reduction to total Partnership capital. As of September 27, 2024 and December 31, 2023, the outstanding amount of Partnership loans was $514 and $439, respectively. Interest income earned from these loans, which is included in interest and dividends in the Consolidated Statements of Income, was $12 and $36 and $10 and $30 for the three- and nine-month periods ended September 27, 2024 and September 29, 2023, respectively.

 

The following table shows the roll forward of outstanding Partnership loans for the:

 

 

Nine Months Ended

 

 

 

September 27, 2024

 

 

September 29, 2023

 

Partnership loans outstanding at beginning of period

 

$

439

 

 

$

335

 

Partnership loans issued during the period

 

 

270

 

 

 

318

 

Repayment of Partnership loans during the period

 

 

(195

)

 

 

(189

)

     Total Partnership loans outstanding

 

$

514

 

 

$

464

 

 

The minimum 7.5% annual return on the face amount of limited partnership capital was $32 and $98 and $33 and $99 for the three- and nine-month periods ended September 27, 2024 and September 29, 2023, respectively. These amounts are included as a component of interest expense in the Consolidated Statements of Income.

 

The Partnership filed a Registration Statement on Form S-8 with the U.S. Securities and Exchange Commission (“SEC”) on December 8, 2021, to register $700 of Interests issuable pursuant to the Partnership's 2021 Employee Limited Partnership Interest Purchase Plan (the "2021 Plan"). In early 2023, the Partnership issued $568 of Interests under the 2021 Plan. The remaining $132 of Interests may be issued at the discretion of the Managing Partner in the future. The Partnership also issued $7 of Interests pursuant to a private placement offering in 2024 and may issue additional Interests from time to time in the future. Proceeds from these offerings are expected to be used to meet growth needs or for other purposes.

NOTE 6 – NET CAPITAL REQUIREMENTS

As a result of its activities as a U.S. broker-dealer, Edward Jones is subject to the net capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and capital compliance rules of the Financial Industry Regulatory Authority ("FINRA"). Under the alternative method permitted by the rules, Edward Jones must maintain minimum net capital equal to the greater of $0.25 or 2% of aggregate debit items arising from client transactions. The net capital rules also provide that Edward Jones’ partnership capital may not be withdrawn if resulting net capital would be less than minimum requirements. Additionally, certain withdrawals require the approval of the SEC and FINRA to the extent they exceed defined levels, even though such withdrawals would not cause net capital to be less than minimum requirements.

 

EJ Canada is a registered broker-dealer regulated by the Canadian Investment Regulatory Organization ("CIRO"). Under the regulations prescribed by CIRO, EJ Canada is required to maintain minimum levels of risk-adjusted capital, which are dependent on the nature of EJ Canada's assets and results of operations.

15


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

The following table shows the Partnership’s capital figures for the U.S. and Canada broker-dealer subsidiaries as of:

 

 

September 27, 2024

 

 

December 31, 2023

 

U.S.:

 

 

 

 

 

 

Net capital

 

$

1,383

 

 

$

981

 

Net capital in excess of the minimum required

 

$

1,320

 

 

$

919

 

Net capital as a percentage of aggregate debit
   items

 

 

43.6

%

 

 

31.7

%

Net capital after anticipated capital withdrawals,
   as a percentage of aggregate debit items

 

 

12.9

%

 

 

13.0

%

 

 

 

 

 

 

 

Canada:

 

 

 

 

 

 

Regulatory risk-adjusted capital

 

$

101

 

 

$

136

 

Regulatory risk-adjusted capital in excess of
   the minimum required

 

$

94

 

 

$

134

 

U.S. net capital, Canada regulatory risk-adjusted capital and the related capital percentages may fluctuate on a daily basis.

 

NOTE 7 – CONTINGENCIES

In the normal course of its business, the Partnership is involved, from time to time, in various legal and regulatory matters, including arbitrations, class actions, other litigation, and examinations, investigations and proceedings by governmental authorities, self-regulatory organizations and other regulators, which may result in losses. These matters include:

Securities Class Action. On March 30, 2018, Edward Jones and its affiliated entities and individuals were named as defendants in a putative class action (Anderson, et al. v. Edward D. Jones & Co., L.P., et al.) filed in the U.S. District Court for the Eastern District of California. The lawsuit originally was brought under the Securities Act of 1933, as amended (the "Securities Act"), and the Exchange Act, as well as Missouri and California law and alleges that the defendants inappropriately transitioned client assets from commission-based accounts to fee-based programs. The plaintiffs requested declaratory, equitable, and exemplary relief, and compensatory damages. On July 9, 2019, the district court entered an order dismissing the lawsuit in its entirety without prejudice. On July 29, 2019, the plaintiffs filed a second amended complaint, which eliminated certain defendants, withdrew the Securities Act claims, added claims under the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"), and certain additional state law claims, and reasserted the remaining claims with modified allegations. The defendants filed a motion to dismiss, the plaintiffs subsequently withdrew their Investment Advisers Act claims, and on November 12, 2019, the district court granted the defendants' motion to dismiss all other claims. The plaintiffs appealed the district court's dismissal of certain of their state law claims on jurisdictional grounds but did not appeal the dismissal of the remaining claims. On March 4, 2021, the U.S. Court of Appeals for the Ninth Circuit reversed the district court's dismissal of those state law claims. After further appellate proceedings in the Ninth Circuit, defendants filed a petition for certiorari with the U.S. Supreme Court, which was denied on January 18, 2022. On February 2, 2022, the defendants filed a renewed motion to dismiss the plaintiffs' remaining state law claims. On May 9, 2022, the court dismissed the second amended complaint without prejudice. On May 31, 2022, the plaintiffs filed a third amended complaint alleging a single claim of breach of fiduciary duty under Missouri and California law against a single defendant, Edward Jones, which Edward Jones moved to dismiss on June 21, 2022. The district court denied the motion to dismiss in an order filed on October 26, 2022. Edward Jones filed its answer to the third amended complaint on November 14, 2022. On September 22, 2023, the plaintiffs moved for class certification. On the same date, Edward Jones moved for summary judgment on the plaintiffs' individual claims and to dismiss the third amended complaint on jurisdictional grounds. The district court entered an order denying the motion to dismiss on January 8, 2024 and held a hearing on Edward Jones' motion for summary judgment on May 23, 2024. On September 9, 2024, the district court entered an order granting Edward Jones' motion for summary judgment and denying all other pending motions as moot, including the motion for class certification. On October 4, 2024, the plaintiffs filed a notice of appeal. Edward Jones denies the plaintiffs' allegations and intends to continue to vigorously defend this lawsuit.

 

16


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

Gender and Race Discrimination Class Action. On March 9, 2022, Edward Jones and JFC were named as defendants in a lawsuit (Dixon, et al. v. Edward D. Jones & Co., L.P., et al.) filed in the U.S. District Court for the Eastern District of Missouri. The lawsuit was brought by a then current financial advisor as a putative collective action alleging gender discrimination under the Fair Labor Standards Act, and by a former financial advisor as a putative class action alleging race discrimination under 42 U.S.C. § 1981. On April 25, 2022, the plaintiffs filed an amended complaint reasserting the original claims with modified allegations and adding claims under Title VII of the Civil Rights Act of 1964 alleging race/national origin, gender, and sexual orientation discrimination on behalf of putative classes of financial advisors. The defendants filed a motion to dismiss on May 23, 2022, and on September 15, 2022, the court stayed further proceedings in the case pending a decision on the motion to dismiss. On March 31, 2023, the district court denied the motion to dismiss and lifted the stay of proceedings. Edward Jones and JFC filed an answer to the amended complaint on April 17, 2023. The first phase of discovery related to collective and class certification is proceeding. Edward Jones and JFC deny the allegations and intend to vigorously defend this lawsuit.

 

Home Office Gender Discrimination Class Action. Edward Jones and JFC were named as defendants in a lawsuit brought by a former employee (Zigler v. Edward D. Jones & Co., L.P. et al.) in the Northern District of Illinois. The initial complaint filed on September 1, 2022 alleged putative class and collective claims under the Equal Pay Act of 1963 ("EPA"), Title VII of the Civil Rights Act of 1964 and Illinois state laws of gender-based wage discrimination against a subset of female home office associates whom the plaintiff described as “home office financial advisor[s]." The plaintiff amended the complaint on November 29, 2022, seeking to expand the putative collective and class definitions to include all female home office associates in any role. Edward Jones and JFC filed a motion to dismiss the amended complaint on January 6, 2023. On June 9, 2023, the district court granted in part and denied in part the defendants' motion to dismiss, permitting the plaintiff's EPA claim and related state-law claim to proceed in connection with only one of the roles she held during her employment by the firm, limiting the plaintiff's Title VII claim and related state-law claim to a disparate treatment theory of liability as opposed to a disparate impact theory, and accepting the plaintiff's agreement to dismiss JFC from the case without prejudice. Edward Jones filed its answer to the amended complaint on June 23, 2023. The first phase of discovery related to collective and class certification is proceeding. Edward Jones denies the allegations and intends to vigorously defend this lawsuit.

 

SEC Off-Channel Communications Platforms Investigation. Edward Jones entered into a settlement with the SEC on August 14, 2024 in connection with its publicly reported investigation of compliance by broker-dealers, investment advisers, and other financial institutions relating to retention of electronic communications stored on personal devices or messaging platforms that were not approved by Edward Jones for business use by its employees. Edward Jones fully cooperated with the SEC's investigation and resolved the matter pursuant to a publicly-filed order. The settlement imposes a cease-and-desist order and censure, required Edward Jones to pay a $50 civil monetary penalty and requires Edward Jones to fulfill certain undertakings including retention of an independent compliance consultant to assess the firm's policies and systems regarding electronic communications recordkeeping and assist Edward Jones in further enhancing those policies and systems.

 

In addition to these matters, the Partnership provides for potential losses that may arise related to other contingencies. The Partnership assesses its liabilities and contingencies utilizing available information. The Partnership accrues for potential losses for those matters where it is probable that the Partnership will incur a potential loss to the extent that the amount of such potential loss can be reasonably estimated, in accordance with FASB ASC No. 450, Contingencies. This liability represents the Partnership’s estimate of the probable loss as of September 27, 2024, after considering, among other factors, the progress of each case, the Partnership's experience with other legal and regulatory matters and discussion with legal counsel, and is believed to be sufficient. The aggregate accrued liability is recorded in accounts payable, accrued expenses and other on the Consolidated Statements of Financial Condition and may be adjusted from time to time to reflect any relevant developments.

For such matters where an accrued liability has not been established and the Partnership believes a loss is both reasonably possible and estimable, as well as for matters where an accrued liability has been recorded but for which an exposure to loss in excess of the amount accrued is both reasonably possible and estimable, the current estimated aggregated range of additional possible loss is up to $13 as of September 27, 2024. This range of reasonably possible loss does not necessarily represent the Partnership's maximum loss exposure as the Partnership was not able to estimate a range of reasonably possible loss for all matters.

17


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

Further, the matters underlying any disclosed estimated range will change from time to time, and actual results may vary significantly. While the outcome of these matters is inherently uncertain, based on information currently available, the Partnership believes that its established liabilities as of September 27, 2024 are adequate, and the liabilities arising from such matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Partnership. However, based on future developments and the potential unfavorable resolution of these matters, the outcome could be material to the Partnership’s future consolidated operating results for a particular period or periods.

NOTE 8 – SEGMENT INFORMATION

The Partnership has determined it has two operating and reportable segments based upon geographic location, the U.S. and Canada. Canada segment information, as reported in the following table, is based upon the consolidated financial statements of the Partnership's Canada operations, which primarily occur through a non-guaranteed subsidiary of the Partnership. The U.S. segment information is derived from the Consolidated Financial Statements less the Canada segment information as presented. Pre-variable income represents income before variable compensation expense and before allocations to partners. This is consistent with how management reviews the segments to assess performance.

 

The following table shows financial information for the Partnership’s reportable segments:

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 27, 2024

 

 

September 29, 2023

 

 

September 27, 2024

 

 

September 29, 2023

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

U.S.

$

4,014

 

 

$

3,394

 

 

$

11,495

 

 

$

9,863

 

Canada

 

109

 

 

 

99

 

 

 

325

 

 

 

289

 

Total net revenue

$

4,123

 

 

$

3,493

 

 

$

11,820

 

 

$

10,152

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-variable income:

 

 

 

 

 

 

 

 

 

 

 

U.S.

$

1,173

 

 

$

840

 

 

$

3,204

 

 

$

2,496

 

Canada

 

24

 

 

 

21

 

 

 

71

 

 

 

62

 

Total pre-variable income

$

1,197

 

 

$

861

 

 

$

3,275

 

 

$

2,558

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable compensation:

 

 

 

 

 

 

 

 

 

 

 

U.S.

$

625

 

 

$

457

 

 

$

1,742

 

 

$

1,322

 

Canada

 

13

 

 

 

10

 

 

 

37

 

 

 

31

 

Total variable compensation

$

638

 

 

$

467

 

 

$

1,779

 

 

$

1,353

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before allocations to partners:

 

 

 

 

 

 

 

 

 

 

 

U.S.

$

548

 

 

$

383

 

 

$

1,462

 

 

$

1,174

 

Canada

 

11

 

 

 

11

 

 

 

34

 

 

 

31

 

Total income before allocations to partners

$

559

 

 

$

394

 

 

$

1,496

 

 

$

1,205

 

 

NOTE 9 – OFFSETTING ASSETS AND LIABILITIES

The Partnership does not offset financial instruments in the Consolidated Statements of Financial Condition. However, the Partnership enters into master netting arrangements with counterparties for securities purchased under agreements to resell that are subject to net settlement in the event of default. These agreements create a right of offset for the amounts due to and due from the same counterparty in the event of default or bankruptcy.

The following table shows the Partnership's securities purchased under agreements to resell as of:

 

 

 

Gross
amounts of

 

 

Gross
amounts
offset in the
Consolidated
Statements
of

 

 

Net amounts
presented
in the
Consolidated
Statements
of

 

 

Gross amounts not offset
in the
Consolidated
Statements of
Financial Condition

 

 

 

 

 

 

recognized
assets

 

 

Financial
Condition

 

 

Financial
Condition

 

 

Financial
instruments

 

Securities
collateral

 

 

Net
amount

 

September 27, 2024

 

$

736

 

 

 

 

 

 

736

 

 

 

 

(736

)

 

$

 

December 31, 2023

 

$

1,139

 

 

 

 

 

 

1,139

 

 

 

 

(1,139

)

 

$

 

 

18


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements, continued

 

NOTE 10 – CASH FLOW INFORMATION

The following table shows supplemental cash flow information for the:

 

 

 

Nine Months Ended

 

 

 

September 27, 2024

 

 

September 29, 2023

 

Non-cash activities:

 

 

 

 

 

 

Issuance of general partnership interests through
   partnership loans in the period

 

$

270

 

 

$

318

 

Repayment of partnership loans through distributions from
   partnership capital in the period

 

$

153

 

 

$

131

 

 

The following table reconciles certain line items on the Consolidated Statements of Financial Condition to the cash, cash equivalents and restricted cash balance on the Consolidated Statements of Cash Flows as of:

 

 

 

September 27, 2024

 

 

September 29, 2023

 

Cash and cash equivalents

 

$

1,944

 

 

$

2,427

 

Cash and investments segregated under federal regulations

 

 

13,246

 

 

 

13,643

 

Less: Investments segregated under federal regulations

 

 

9,038

 

 

 

10,193

 

Total cash, cash equivalents and restricted cash

 

$

6,152

 

 

$

5,877

 

 

Restricted cash represents cash segregated in special reserve bank accounts for the benefit of U.S. clients pursuant to Rule 15c3-3 under the Exchange Act.

 

 

 

19


PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis is intended to help the reader understand the results of operations, the financial condition and the cash flows of the Partnership. Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in Part I, Item 1 – Financial Statements of this Quarterly Report on Form 10-Q and Part II, Item 8 – Financial Statements and Supplementary Data of the Partnership’s Annual Report. All amounts are presented in millions, except as otherwise noted.

Basis of Presentation

The Partnership broadly categorizes its net revenues into four categories: fee revenue, trade revenue, net interest and dividends revenue (net of interest expense) and other revenue, net. In the Partnership’s Consolidated Statements of Income, fee revenue is composed of asset-based fees and account and activity fees. Asset-based fees include program fees which are based on the average daily market value of client assets in the program, as well as contractual rates. These fees are impacted by changes in market values of the assets and by client dollars invested in and divested from the accounts. Account and activity fees are impacted by the number of client accounts and the variety of services provided to those accounts, among other factors. Trade revenue is composed of commissions and principal transactions revenue. Commissions are earned from the distribution of mutual fund shares and insurance products and the purchase or sale of securities. Principal transactions revenue primarily results from the Partnership's distribution of and participation in principal trading activities in municipal obligations, certificates of deposit and corporate obligations. Trade revenue is impacted by the trading volume (client dollars invested), mix of the products in which clients invest and the size of trades, all of which may be impacted by market volatility, and margins earned on the transactions. Net interest and dividends revenue is impacted by the amount of cash and investments, receivables from and payables to clients, the variability of interest rates earned and paid on such balances, the number of Interests outstanding and the balances of Partnership loans. Other revenue, net, primarily consists of unrealized gains and losses associated with changes in the fair market value of investment securities, resulting from changes in market levels and the interest rate environment.

20


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

OVERVIEW

The following table sets forth the changes in major categories of the Consolidated Statements of Income as well as several related key financial metrics as of, and for the three- and nine-month periods ended, September 27, 2024 and September 29, 2023. Management of the Partnership relies on this financial information and the related metrics to evaluate the Partnership’s operating performance and financial condition.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

Sept. 27, 2024

 

 

Sept. 29, 2023

 

 

% Change

 

 

Sept. 27, 2024

 

 

Sept. 29, 2023

 

 

% Change

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

3,369

 

 

$

2,894

 

 

 

16

%

 

$

9,667

 

 

$

8,371

 

 

 

15

%

% of net revenue

 

 

82

%

 

 

83

%

 

 

-1

%

 

 

82

%

 

 

82

%

 

 

Trade revenue

 

 

442

 

 

 

359

 

 

 

23

%

 

 

1,299

 

 

 

1,044

 

 

 

24

%

% of net revenue

 

 

11

%

 

 

10

%

 

 

10

%

 

 

11

%

 

 

10

%

 

 

10

%

Interest and dividends

 

 

294

 

 

 

292

 

 

 

1

%

 

 

904

 

 

 

851

 

 

 

6

%

Other revenue, net

 

 

83

 

 

 

15

 

 

 

453

%

 

 

149

 

 

 

99

 

 

 

51

%

Total revenue

 

 

4,188

 

 

 

3,560

 

 

 

18

%

 

 

12,019

 

 

 

10,365

 

 

 

16

%

Interest expense

 

 

65

 

 

 

67

 

 

 

-3

%

 

 

199

 

 

 

213

 

 

 

-7

%

Net revenue

 

 

4,123

 

 

 

3,493

 

 

 

18

%

 

 

11,820

 

 

 

10,152

 

 

 

16

%

Operating expenses

 

 

3,564

 

 

 

3,099

 

 

 

15

%

 

 

10,324

 

 

 

8,947

 

 

 

15

%

Income before allocations to partners

 

$

559

 

 

$

394

 

 

 

42

%

 

$

1,496

 

 

$

1,205

 

 

 

24

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before allocations to partners margin(1)

 

 

13.3

%

 

 

11.1

%

 

 

20

%

 

 

12.4

%

 

 

11.6

%

 

 

7

%

Client assets under care ($ billions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

$

2,176

 

 

$

1,762

 

 

 

23

%

 

$

2,176

 

 

$

1,762

 

 

 

23

%

Average

 

$

2,118

 

 

$

1,801

 

 

 

18

%

 

$

2,035

 

 

$

1,747

 

 

 

16

%

Advisory programs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

$

864

 

 

$

673

 

 

 

28

%

 

$

864

 

 

$

673

 

 

 

28

%

Average

 

$

837

 

 

$

688

 

 

 

22

%

 

$

799

 

 

$

666

 

 

 

20

%

Client dollars invested ($ billions)(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade

 

$

55

 

 

$

55

 

 

 

 

$

173

 

 

$

172

 

 

 

1

%

Advisory programs

 

$

14

 

 

$

9

 

 

 

56

%

 

$

41

 

 

$

24

 

 

 

71

%

Client households at period end

 

 

6.5

 

 

 

6.3

 

 

 

3

%

 

 

6.5

 

 

 

6.3

 

 

 

3

%

Net new households for the period(3)

 

 

53,000

 

 

 

37,000

 

 

 

43

%

 

 

177,000

 

 

 

153,000

 

 

 

16

%

Net new assets for the period ($ billions)(4):

 

$

16

 

 

$

19

 

 

 

-16

%

 

$

53

 

 

$

76

 

 

 

-30

%

Financial advisors (actual):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

19,885

 

 

 

19,009

 

 

 

5

%

 

 

19,885

 

 

 

19,009

 

 

 

5

%

Average

 

 

19,749

 

 

 

18,949

 

 

 

4

%

 

 

19,534

 

 

 

18,887

 

 

 

3

%

Attrition %(5)

 

 

4.7

%

 

 

4.5

%

 

 

4

%

 

 

5.1

%

 

 

4.8

%

 

 

6

%

Dow Jones Industrial Average (actual):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

42,313

 

 

 

33,508

 

 

 

26

%

 

 

42,313

 

 

 

33,508

 

 

 

26

%

Average

 

 

40,552

 

 

 

34,665

 

 

 

17

%

 

 

39,300

 

 

 

33,844

 

 

 

16

%

S&P 500 Index (actual):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

5,738

 

 

 

4,288

 

 

 

34

%

 

 

5,738

 

 

 

4,288

 

 

 

34

%

Average

 

 

5,539

 

 

 

4,458

 

 

 

24

%

 

 

5,260

 

 

 

4,221

 

 

 

25

%

Bloomberg Aggregate Bond Index (actual):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

102

 

 

 

94

 

 

 

9

%

 

 

102

 

 

 

94

 

 

 

9

%

Average

 

 

100

 

 

 

96

 

 

 

4

%

 

 

98

 

 

 

98

 

 

 

 

(1)
Income before allocations to partners margin is income before allocations to partners expressed as a percentage of total revenue.
(2)
Client dollars invested for trade revenue represents the principal amount of clients’ buy and sell transactions resulting in revenue and for advisory programs revenue represents the net of the inflows and outflows of client dollars into advisory programs.
(3)
Net new households represents new client households opened less client households closed during the period, rounded to the nearest thousand. The current period metric is estimated based on available information.
(4)
Net new assets represents cash and securities inflows and outflows, excluding mutual fund capital gain distributions received by U.S. clients.
(5)
Attrition % represents the annualized number of financial advisors that left the firm during the period compared to the total number of financial advisors as of period end.

21


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Third Quarter 2024 versus Third Quarter 2023 Overview

The Partnership ended the third quarter of 2024 with a 23% increase in client assets under care ("AUC") to $2.2 trillion and an 18% increase in average client AUC, reflecting increases in the market value of client assets as well as the cumulative impact of net new assets gathered. Advisory programs' average AUC increased 22% due to higher average market levels and the increased investment of client assets into advisory programs. Net new assets decreased 16% from higher asset outflows with ongoing macroeconomic conditions, including inflation and the higher costs of lending.

 

The Partnership ended the third quarter of 2024 with 19,885 financial advisors, representing a 5% increase compared to the end of the same period in 2023. Financial advisor attrition was 4.7%. The Partnership is continuing to invest in new tools and technology; an expanded set of products and solutions; and new practice models that give our financial advisors greater autonomy, flexibility and choice in how they serve clients. The Partnership remains focused on developing and rewarding branch teams and building new practice management capabilities to help them grow their practices.

 

Net revenue increased 18% to $4,123, primarily due to increases in fee revenue and trade revenue. The increase in fee revenue was primarily due to increases in advisory programs with higher average market levels and the increase in client dollars invested in advisory programs. Trade revenue increased primarily due to higher overall margins earned.

 

Operating expenses increased 15% to $3,564, primarily due to increases in financial advisor compensation and benefits expense and variable compensation. Financial advisor compensation and benefits increased primarily due to an increase in revenues on which commissions are earned. Variable compensation increased due to increased branch and overall Partnership profitability.

 

Overall, the increase in net revenue, partially offset by the increase in operating expenses, led to income before allocations to partners increasing 42% to $559. Income before allocations to partners margin increased to 13.3%, reflecting strong current financial results while continuing to invest in the future.

 

Nine Months Ended September 27, 2024 versus Nine Months Ended September 29, 2023 Overview

Average client AUC increased 16% during the first nine months of 2024 compared to the same period in 2023, reflecting increases in the market value of client assets as well as the cumulative impact of net new assets gathered. Advisory programs' average AUC increased 20% due to higher average market levels and the increased investment of client assets into advisory programs. Net new assets decreased 30% from higher asset outflows with ongoing macroeconomic conditions, including inflation and the higher costs of lending.

 

Net revenue increased 16% to $11,820, primarily due to increases in fee revenue and trade revenue. The increase in fee revenue was primarily due to increases in advisory programs with higher average market levels and the increase in client dollars invested in advisory programs. Trade revenue increased primarily due to higher overall margins earned.

 

Operating expenses increased 15% to $10,324, primarily due to increases in financial advisor compensation and benefits expense and variable compensation. Financial advisor compensation and benefits increased primarily due to an increase in revenues on which commissions are earned. Variable compensation increased due to increased branch and overall Partnership profitability.

 

Overall, the increase in net revenue, partially offset by the increase in operating expenses, led to income before allocations to partners increasing 24% to $1,496. Income before allocations to partners margin was 12.4%, reflecting a strategic balance between investing in the future and current financial results.

 

22


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

RESULTS OF OPERATIONS FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 27, 2024 AND SEPTEMBER 29, 2023

The discussion below details the significant fluctuations and their drivers for each of the major categories of the Partnership’s Consolidated Statements of Income.

Fee Revenue

Fee revenue, which consists of asset-based fees and account and activity fees, increased 16% to $3,369 and 15% to $9,667 in the third quarter and first nine months of 2024, respectively, compared to the same periods in 2023. A discussion of fee revenue components follows.

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

Sept. 27, 2024

 

 

Sept 29, 2023

 

 

% Change

 

 

Sept. 27, 2024

 

 

Sept 29, 2023

 

 

% Change

 

Fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Asset-based fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory programs fees

 

$

2,445

 

 

$

2,015

 

 

 

21

%

 

$

6,920

 

 

$

5,789

 

 

 

20

%

Service fees

 

 

411

 

 

 

378

 

 

 

9

%

 

 

1,203

 

 

 

1,107

 

 

 

9

%

Cash solutions fees

 

 

141

 

 

 

150

 

 

 

-6

%

 

 

435

 

 

 

428

 

 

 

2

%

Other asset-based fees

 

 

187

 

 

 

165

 

 

 

13

%

 

 

545

 

 

 

485

 

 

 

12

%

Total asset-based fee revenue

 

 

3,184

 

 

 

2,708

 

 

 

18

%

 

 

9,103

 

 

 

7,809

 

 

 

17

%

   Account and activity fee revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder accounting services fees

 

 

116

 

 

 

116

 

 

 

 

 

349

 

 

 

346

 

 

 

1

%

Other account and activity fee revenue

 

 

69

 

 

 

70

 

 

 

-1

%

 

 

215

 

 

 

216

 

 

 

Total account and activity fee revenue

 

 

185

 

 

 

186

 

 

 

-1

%

 

 

564

 

 

 

562

 

 

 

   Total fee revenue

 

$

3,369

 

 

$

2,894

 

 

 

16

%

 

$

9,667

 

 

$

8,371

 

 

 

15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Average U.S. client asset values ($ billions)(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory programs

 

$

820

 

 

$

674

 

 

 

22

%

 

$

783

 

 

$

652

 

 

 

20

%

Mutual fund assets held outside of
   advisory programs

 

$

643

 

 

$

550

 

 

 

17

%

 

$

620

 

 

$

536

 

 

 

16

%

 

(1)
Assets on which the Partnership earns asset-based fee revenue. The U.S. portion of consolidated asset-based fee revenue was approximately 98% for the periods presented.

 

Asset-based fee revenue increased 18% to $3,184 and 17% to $9,103 in the third quarter and first nine months of 2024, respectively, primarily due to increases in revenue from advisory programs fees. Growth in revenue from advisory programs was due to higher average market levels, as well as the continued increase in investment of client assets in advisory programs.

 

23


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Trade Revenue

 

Trade revenue, which consists of commissions and principal transactions, increased 23% to $442 and 24% to $1,299 in the third quarter and first nine months of 2024, respectively, compared to the same periods in 2023. A discussion of trade revenue components follows.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

Sept. 27, 2024

 

 

 

Sept. 29, 2023

 

 

 

% Change

 

 

Sept. 27, 2024

 

 

 

Sept. 29, 2023

 

 

 

% Change

 

Trade revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

$

145

 

 

 

$

126

 

 

 

 

15

%

 

$

448

 

 

 

$

366

 

 

 

 

22

%

Mutual funds

 

 

118

 

 

 

 

96

 

 

 

 

23

%

 

 

348

 

 

 

 

296

 

 

 

 

18

%

Insurance products and other

 

 

120

 

 

 

 

82

 

 

 

 

46

%

 

 

333

 

 

 

 

224

 

 

 

 

49

%

Total commissions revenue

 

$

383

 

 

 

$

304

 

 

 

 

26

%

 

$

1,129

 

 

 

$

886

 

 

 

 

27

%

Principal transactions

 

 

59

 

 

 

 

55

 

 

 

 

7

%

 

 

170

 

 

 

 

158

 

 

 

 

8

%

Total trade revenue

 

$

442

 

 

 

$

359

 

 

 

 

23

%

 

$

1,299

 

 

 

$

1,044

 

 

 

 

24

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related metrics:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Client dollars invested ($ billions)(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

 

$

10.4

 

 

19%

$

8.5

 

 

16%

 

22

%

 

$

31.7

 

 

18%

$

24.7

 

 

15%

 

28

%

Mutual funds

 

 

7.9

 

 

14%

 

5.7

 

 

10%

 

39

%

 

 

22.4

 

 

13%

 

17.4

 

 

10%

 

29

%

Insurance products and other

 

 

4.3

 

 

8%

 

2.8

 

 

5%

 

54

%

 

 

12.4

 

 

7%

 

7.1

 

 

4%

 

75

%

Principal transactions

 

 

32.0

 

 

59%

 

38.0

 

 

69%

 

-16

%

 

 

106.3

 

 

62%

 

122.5

 

 

71%

 

-13

%

Total client dollars invested

 

$

54.6

 

 

 

$

55.0

 

 

 

 

-1

%

 

$

172.8

 

 

 

$

171.7

 

 

 

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Margin per $1,000 invested

 

$

8.1

 

 

 

$

6.6

 

 

 

 

23

%

 

$

7.5

 

 

 

$

6.1

 

 

 

 

23

%

U.S. business days

 

 

63

 

 

 

 

63

 

 

 

 

0

%

 

 

187

 

 

 

 

187

 

 

 

 

 

(1)
Percentages represent client dollars invested in each product as a percent of total client dollars invested.

 

Trade revenue increased in the third quarter and first nine months of 2024 primarily due to an increase in commissions revenue and higher overall margin earned. Commissions revenue increased due to increases in insurance products and other, equities and mutual funds commissions revenue as a result of higher client dollars invested in each respective product. Overall margin increased with a larger portion of client dollars invested in equities, insurance products and mutual funds which earn higher margins than principal transaction products.

 

Net Interest and Dividends

 

Net interest and dividends revenue increased 2% to $229 and 11% to $705 in the third quarter and first nine months of 2024, respectively. The increase in the third quarter was primarily due to a decrease in customer credit interest expense from lower client cash balances. The increase in the first nine months was primarily due to an increase in interest income earned on short-term investments, reflecting higher interest rates, as well as a decrease in customer credit interest expense from lower cash balances. The year-to-date increase was partially offset by a decrease in interest income earned on client margin loans due to lower average loan balances.

24


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Operating Expenses

Operating expenses increased 15% in both the third quarter and first nine months of 2024 to $3,564 and $10,324, respectively, compared to the same periods in 2023. A discussion of operating expense components follows.

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

Sept. 27, 2024

 

 

Sept. 29, 2023

 

 

% Change

 

 

Sept. 27, 2024

 

 

Sept. 29, 2023

 

 

% Change

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial advisor

 

$

1,576

 

 

$

1,298

 

 

 

21

%

 

$

4,567

 

 

$

3,839

 

 

 

19

%

Home office and branch

 

 

608

 

 

 

593

 

 

 

3

%

 

 

1,814

 

 

 

1,731

 

 

 

5

%

Variable compensation

 

 

638

 

 

 

467

 

 

 

37

%

 

 

1,779

 

 

 

1,353

 

 

 

31

%

Total compensation and benefits

 

 

2,822

 

 

 

2,358

 

 

 

20

%

 

 

8,160

 

 

 

6,923

 

 

 

18

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Communications and data processing

 

 

243

 

 

 

239

 

 

 

2

%

 

 

739

 

 

 

668

 

 

 

11

%

Occupancy and equipment

 

 

159

 

 

 

155

 

 

 

3

%

 

 

475

 

 

 

461

 

 

 

3

%

Fund sub-adviser fees

 

 

81

 

 

 

70

 

 

 

16

%

 

 

233

 

 

 

201

 

 

 

16

%

Professional and consulting fees

 

 

47

 

 

 

47

 

 

 

 

 

137

 

 

 

130

 

 

 

5

%

Advertising

 

 

38

 

 

 

40

 

 

 

-5

%

 

 

118

 

 

 

107

 

 

 

10

%

Other operating expenses

 

 

174

 

 

 

190

 

 

 

-8

%

 

 

462

 

 

 

457

 

 

 

1

%

Total operating expenses

 

$

3,564

 

 

$

3,099

 

 

 

15

%

 

$

10,324

 

 

$

8,947

 

 

 

15

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Related metrics (actual):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of physical branches(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

15,262

 

 

 

15,445

 

 

 

-1

%

 

 

15,262

 

 

 

15,445

 

 

 

-1

%

Average

 

 

15,284

 

 

 

15,469

 

 

 

-1

%

 

 

15,317

 

 

 

15,479

 

 

 

-1

%

Financial advisors:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

19,885

 

 

 

19,009

 

 

 

5

%

 

 

19,885

 

 

 

19,009

 

 

 

5

%

Average

 

 

19,749

 

 

 

18,949

 

 

 

4

%

 

 

19,534

 

 

 

18,887

 

 

 

3

%

Client support team professionals(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

20,080

 

 

 

18,319

 

 

 

10

%

 

 

20,080

 

 

 

18,319

 

 

 

10

%

Average

 

 

20,064

 

 

 

18,277

 

 

 

10

%

 

 

19,921

 

 

 

18,143

 

 

 

10

%

Home office associates(2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

9,406

 

 

 

9,374

 

 

 

 

 

9,406

 

 

 

9,374

 

 

 

Average

 

 

9,417

 

 

 

9,340

 

 

 

1

%

 

 

9,446

 

 

 

9,181

 

 

 

3

%

(1)
Prior period balances have been adjusted to align to current year presentation.
(2)
Counted on a full-time equivalent basis.

 

The increases in operating expenses in the third quarter and first nine months of 2024 compared to the same periods in 2023 were primarily due to increases in financial advisor compensation and benefits expense and variable compensation, which are described below.

 

Financial advisor compensation and benefits expense increased 21% to $1,576 and 19% to $4,567 in the third quarter and first nine months of 2024, respectively. The increases in both periods were primarily due to increases in revenues on which commissions are earned and increased retirement transition plan ("RTP") costs from higher payouts and increased participation in the RTP program.

 

Home office and branch compensation and benefits expense increased 3% to $608 and 5% to $1,814 in the third quarter and first nine months of 2024, respectively. The increases in both periods were primarily due to increases in the number of client support team professionals and higher average wages.

 

25


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Variable compensation expands and contracts in relation to the Partnership’s profitability and margin earned. A significant portion of the Partnership’s profits is allocated to variable compensation and paid to associates in the form of bonuses and profit sharing. The increases in variable compensation of 37% to $638 and 31% to $1,779 in the third quarter and first nine months of 2024, respectively, were due to increases in branch and overall Partnership profitability.

 

Segment Information


The Partnership has two operating and reportable segments based upon geographic location, the U.S. and Canada. Canada segment information, as reported in the following table, is based upon the consolidated financial statements of the Partnership’s Canada operations. The U.S. segment information is derived from the Consolidated Financial Statements less the Canada segment information as presented. Pre-variable income represents income before variable compensation expense and before allocations to partners. This is consistent with how management views the segments to assess performance.

 

The following table shows financial and other information for the Partnership’s reportable segments.

26


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

Sept. 27, 2024

 

 

Sept. 29, 2023

 

 

% Change

 

 

Sept. 27, 2024

 

 

Sept. 29, 2023

 

 

% Change

 

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

4,014

 

 

$

3,394

 

 

 

18

%

 

$

11,495

 

 

$

9,863

 

 

 

17

%

Canada

 

 

109

 

 

 

99

 

 

 

10

%

 

 

325

 

 

 

289

 

 

 

12

%

Total net revenue

 

 

4,123

 

 

 

3,493

 

 

 

18

%

 

 

11,820

 

 

 

10,152

 

 

 

16

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (excluding variable compensation):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

2,841

 

 

 

2,554

 

 

 

11

%

 

 

8,291

 

 

 

7,367

 

 

 

13

%

Canada

 

 

85

 

 

 

78

 

 

 

9

%

 

 

254

 

 

 

227

 

 

 

12

%

Total operating expenses

 

 

2,926

 

 

 

2,632

 

 

 

11

%

 

 

8,545

 

 

 

7,594

 

 

 

13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-variable income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

1,173

 

 

 

840

 

 

 

40

%

 

 

3,204

 

 

 

2,496

 

 

 

28

%

Canada

 

 

24

 

 

 

21

 

 

 

14

%

 

 

71

 

 

 

62

 

 

 

15

%

Total pre-variable income

 

 

1,197

 

 

 

861

 

 

 

39

%

 

 

3,275

 

 

 

2,558

 

 

 

28

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable compensation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

625

 

 

 

457

 

 

 

37

%

 

 

1,742

 

 

 

1,322

 

 

 

32

%

Canada

 

 

13

 

 

 

10

 

 

 

30

%

 

 

37

 

 

 

31

 

 

 

19

%

Total variable compensation

 

 

638

 

 

 

467

 

 

 

37

%

 

 

1,779

 

 

 

1,353

 

 

 

31

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before allocations to partners:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

548

 

 

 

383

 

 

 

43

%

 

 

1,462

 

 

 

1,174

 

 

 

25

%

Canada

 

 

11

 

 

 

11

 

 

 

 

 

34

 

 

 

31

 

 

 

10

%

Total income before allocations to partners

 

$

559

 

 

$

394

 

 

 

42

%

 

$

1,496

 

 

$

1,205

 

 

 

24

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before allocations to partners margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

13.4

%

 

 

11.1

%

 

 

21

%

 

 

12.5

%

 

 

11.7

%

 

 

7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-variable income margin(1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada

 

 

21.8

%

 

 

21.2

%

 

 

3

%

 

 

21.6

%

 

 

21.3

%

 

 

1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Client assets under care ($ billions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

$

2,130.9

 

 

$

1,724.5

 

 

 

24

%

 

$

2,130.9

 

 

$

1,724.5

 

 

 

24

%

Average

 

$

2,073.4

 

 

$

1,762.1

 

 

 

18

%

 

$

1,992.3

 

 

$

1,709.0

 

 

 

17

%

Canada

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

$

45.5

 

 

$

37.4

 

 

 

22

%

 

$

45.5

 

 

$

37.4

 

 

 

22

%

Average

 

$

44.3

 

 

$

38.6

 

 

 

15

%

 

$

42.8

 

 

$

37.6

 

 

 

14

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new households for the period:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. (rounded in thousands)

 

 

53,000

 

 

 

37,000

 

 

 

43

%

 

 

176,000

 

 

 

151,000

 

 

 

17

%

Canada (rounded in hundreds)

 

 

400

 

 

 

800

 

 

 

-50

%

 

 

1,000

 

 

 

2,400

 

 

 

-58

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new assets for the period ($ billions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

15.1

 

 

$

18.7

 

 

 

-19

%

 

$

51.7

 

 

$

74.5

 

 

 

-31

%

Canada

 

$

0.4

 

 

$

0.6

 

 

 

-33

%

 

$

1.3

 

 

$

1.6

 

 

 

-19

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial advisors (actual):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

19,013

 

 

 

18,162

 

 

 

5

%

 

 

19,013

 

 

 

18,162

 

 

 

5

%

Average

 

 

18,879

 

 

 

18,104

 

 

 

4

%

 

 

18,671

 

 

 

18,045

 

 

 

3

%

Canada

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At period end

 

 

872

 

 

 

847

 

 

 

3

%

 

 

872

 

 

 

847

 

 

 

3

%

Average

 

 

870

 

 

 

845

 

 

 

3

%

 

 

863

 

 

 

842

 

 

 

2

%

(1)
Pre-variable income margin is pre-variable income expressed as a percentage of total revenue.

27


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

U.S.

Net revenue increased 18% to $4,014 and 17% to $11,495 in the third quarter and first nine months of 2024, respectively, compared to the same periods in 2023, primarily due to increases in fee revenue and trade revenue. The increase in fee revenue was primarily due to an increase in advisory programs fees revenue with higher average market levels and the increase in investment of client assets in advisory programs. Trade revenue increased primarily due to higher overall margins earned.

 

Operating expenses (excluding variable compensation) increased 11% to $2,841 and 13% to $8,291 in the third quarter and first nine months of 2024, respectively, primarily due to increases in financial advisor compensation and benefits expense. Financial advisor compensation and benefits increased primarily due to increases in revenues on which commissions are earned in both periods.

 

Income before allocations to partners increased 43% to $548 and 25% to $1,462 in the third quarter and first nine months of 2024, respectively. Income before allocations to partners margin was 13.4% and 12.5% in the third quarter and first nine months of 2024, respectively, reflecting a strategic balance in the U.S. between investing in the future and current financial results.

Canada

 

Net revenue increased 10% to $109 and 12% to $325 in the third quarter and first nine months of 2024, respectively, compared to the same periods in 2023, primarily due to increases in fee revenue and trade revenue. Fee revenue increased primarily due to an increase in advisory program fees with higher average market levels and the increase in investment of client assets in advisory programs in the third quarter of 2024.

 

Operating expenses (excluding variable compensation) increased 9% to $85 and 12% to $254 in the third quarter and first nine months of 2024, respectively, primarily due to increases in financial advisor compensation and benefits expense. Financial advisor compensation and benefits increased primarily due to increases in revenues on which commissions are earned in both periods.

 

Income before allocations to partners remained constant at $11 in the third quarter and increased 10% to $34 in the first nine months of 2024. Pre-variable income margin was 21.8% and 21.6%, respectively, reflecting a strategic balance in Canada between investing in the future and current financial results.

 

LEGISLATIVE AND REGULATORY REFORM

As discussed more fully in Part I, Item 1A – Risk Factors – Risk Related to the Partnership's Business – Legislative and Regulatory Initiatives of the Partnership’s Annual Report, the Partnership continues to monitor several proposed, potential and recently enacted federal and state legislation, rules and regulations.

 

MUTUAL FUNDS AND INSURANCE PRODUCTS

 

The Partnership estimates approximately 21% for both the three- and nine-month periods ended September 27, 2024 and 22% for the three- and nine-month periods ended September 29, 2023 of its total revenue was derived from sales and services related to mutual fund and insurance products.

 

Significant reductions in these revenues due to changes in the mutual funds industry affecting fee structures that result in decreased margins earned, regulatory reform or other changes to the Partnership’s relationship with mutual fund or insurance companies could have a material adverse effect on the Partnership’s results of operations, financial condition, and liquidity.

28


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

LIQUIDITY AND CAPITAL RESOURCES

The Partnership requires liquidity to cover its operating expenses, net capital requirements, capital expenditures, distributions to partners and redemptions of Partnership interests, as well as to facilitate client transactions. The principal sources for meeting the Partnership’s liquidity requirements include cash and cash equivalents, securities purchased under agreements to resell, government and agency investment securities, partnership capital and funds generated from operations, all discussed further below. The Partnership believes that the liquid nature of these sources provides flexibility for managing and financing the operating needs of the Partnership and will be sufficient to meet its capital and liquidity requirements for the next twelve months. Depending on conditions in the capital markets and other factors, the Partnership will, from time to time, consider the issuance of additional Partnership capital and debt, the proceeds of which could be used to meet growth needs or for other purposes.

Partnership Capital

The Partnership’s growth in capital has historically been the result of the sale of Interests to its associates and existing limited partners, the sale of subordinated limited partnership interests to its current or retiring general partners, and retention of a portion of general partner earnings.

 

The Partnership filed a Registration Statement on Form S-8 with the U.S. Securities and Exchange Commission (“SEC”) on December 8, 2021, to register $700 of Interests issuable pursuant to the Partnership's 2021 Employee Limited Partnership Interest Purchase Plan (the "2021 Plan"). In early 2023, the Partnership issued $568 of Interests under the 2021 Plan. The remaining $132 of Interests may be issued at the discretion of the Managing Partner in the future. The Partnership also issued $7 of Interests pursuant to a private placement offering in 2024 and may issue additional Interests from time to time in the future. Proceeds from these offerings are expected to be used to meet growth needs or for other purposes.

 

The Partnership’s capital and profits interests subject to mandatory redemption as of September 27, 2024, net of reserve for anticipated withdrawals and Partnership loans, was $4,341, an increase of $292 from December 31, 2023. This increase was primarily due to the additional capital contributions related to limited partner, subordinated limited partner and general partner interests ($7, $65 and $271, respectively) and the retention of a portion of general partner earnings ($147), partially offset by the net increase in Partnership loans outstanding ($75) and the redemption of limited partner, subordinated limited partner and general partner interests ($20, $13 and $90, respectively). During each of the three- and nine-month periods ended September 27, 2024 and September 29, 2023, the Partnership retained 13.8% of income allocated to general partners.

 

The Partnership makes loans available to those general partners and, in limited circumstances, subordinated limited partners (in each case, other than members of the Enterprise Leadership Team ("ELT"), as defined in the Partnership’s Twenty-Second Amended and Restated Agreement of Registered Limited Liability Limited Partnership, dated August 15, 2023 (the "Partnership Agreement")), who require financing for some or all of their Partnership capital contributions. Partners borrowing from the Partnership will be required to repay such loans by applying the earnings received from the Partnership to such loans, net of amounts retained by the Partnership, amounts distributed for income taxes and a portion of earnings distributed to the partner. The Partnership has full recourse against any partner that defaults on loan obligations to the Partnership. The Partnership does not anticipate that partner loans will have an adverse impact on the Partnership’s short-term liquidity or capital resources.

 

Any partner may also choose to have individual banking arrangements for their Partnership capital contributions. The Partnership does not guarantee these bank loans, nor can the partner pledge their partnership interest as collateral for the bank loan. The Partnership performs certain administrative functions in connection with its limited partners who have elected to finance a portion of their Partnership capital contributions through individual unsecured bank loan agreements. For all limited partner capital contributions financed through such bank loan agreements, each agreement instructs the Partnership to apply the proceeds from the redemption of that individual’s capital account to the repayment of the limited partner's bank loan prior to any funds being released to the partner. In addition, the partner is required to apply Partnership earnings, net of any distributions to pay taxes, to service the interest and principal on the bank loan. Partners who finance all or a portion of their capital contributions with bank financing may be more likely to request the withdrawal of capital to meet bank financing requirements should the partners experience a period of reduced earnings. As a partnership, any withdrawals by general partners, subordinated limited partners or limited partners would reduce the Partnership’s available liquidity and capital.

29


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Many of the same banks that provide financing to limited partners also provide financing to the Partnership. To the extent these banks increase credit available to the partners, financing available to the Partnership may be reduced.

 

The following table represents amounts related to Partnership loans as well as bank loans (for which the Partnership facilitates certain administrative functions). Partners may have arranged their own bank loans to finance their Partnership capital for which the Partnership does not facilitate certain administrative functions and therefore any such loans are not included in the table.

 

 

 

As of September 27, 2024

 

 

 

Limited
Partnership
Interests

 

 

Subordinated
Limited
Partnership
Interests

 

 

General
Partnership
Interests

 

 

Total
Partnership
Interests

 

Total Partnership capital(1)

 

$

1,737

 

 

$

718

 

 

$

2,400

 

 

$

4,855

 

Partnership capital owned by partners with
   individual loans

 

$

451

 

 

$

 

 

$

1,190

 

 

$

1,641

 

Partnership capital owned by partners with individual
   loans as a percent of total Partnership capital

 

 

26

%

 

 

 

 

 

50

%

 

 

34

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Individual loans:

 

 

 

 

 

 

 

 

 

 

 

 

Individual bank loans

 

$

123

 

 

$

 

 

$

 

 

$

123

 

Individual Partnership loans

 

 

 

 

 

 

 

 

514

 

 

 

514

 

Total individual loans

 

$

123

 

 

$

 

 

$

514

 

 

$

637

 

Individual loans as a percent of total Partnership capital

 

 

7

%

 

 

 

 

 

21

%

 

 

13

%

Individual loans as a percent of respective Partnership
   capital owned by partners with loans

 

 

27

%

 

 

 

 

 

43

%

 

 

39

%

(1)
Total Partnership capital, as defined for this table, is before the reduction of Partnership loans and is net of reserve for anticipated withdrawals.

Historically, neither the amount of Partnership capital financed with individual loans as indicated in the table above, nor the amount of partner withdrawal requests, has had a significant impact on the Partnership’s liquidity or capital resources.

 

Lines of Credit

The following table shows the composition of the Partnership’s aggregate bank lines of credit in place as of:

 

 

September 27, 2024

 

 

December 31, 2023

 

2022 Credit Facility

 

$

500

 

 

$

500

 

Uncommitted secured credit facilities

 

 

390

 

 

 

390

 

Total bank lines of credit

 

$

890

 

 

$

890

 

In accordance with the terms of the Partnership's $500 committed revolving line of credit (the "2022 Credit Facility"), entered into in October 2022, the Partnership is required to maintain a leverage ratio of no more than 35% and minimum Partnership capital, net of reserve for anticipated withdrawals and Partnership loans, of at least $2,809. In addition, Edward Jones is required to maintain a minimum tangible net worth of at least $1,349 and minimum regulatory net capital of at least 6% of aggregate debit items as calculated under the alternative method. The Partnership has the ability to draw on various types of loans. The associated interest rate depends on the type of loan, duration of the loan and the Partnership's private credit rating. Contractual rates are based on an index rate plus the applicable spread. The 2022 Credit Facility is intended to provide short-term liquidity to the Partnership should the need arise. As of September 27, 2024, the Partnership was in compliance with all covenants related to the 2022 Credit Facility.

30


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

In addition, the Partnership has multiple uncommitted secured lines of credit totaling $390 that are subject to change at the discretion of the banks. The Partnership also has an additional uncommitted line of credit where the amount and the associated collateral requirements are at the bank's discretion in the event of a borrowing. Based on credit market conditions and the uncommitted nature of these credit facilities, it is possible that these lines of credit could decrease or not be available in the future. Actual borrowing capacity on secured lines is based on availability of client margin securities or firm-owned securities, which would serve as collateral on loans in the event the Partnership borrowed against these lines.

 

There were no amounts outstanding on the 2022 Credit Facility or the uncommitted lines of credit as of September 27, 2024 or December 31, 2023. In addition, the Partnership did not have any draws against these lines of credit during the nine-month period ended September 27, 2024, except for periodically testing draw procedures.

 

Cash Activity

As of September 27, 2024, the Partnership had $1,944 in cash and cash equivalents and $736 in securities purchased under agreements to resell, which generally have maturities of less than one week. This totaled $2,680 of Partnership liquidity as of September 27, 2024, a 4% decrease from $2,784 as of December 31, 2023. The Partnership also held $895 and $600 in government and agency obligations as of September 27, 2024 and December 31, 2023, respectively, to help facilitate cash management and maintain firm liquidity. The Partnership had $13,246 and $15,565 in cash and investments segregated under federal regulations as of September 27, 2024 and December 31, 2023, respectively, which was not available for general use. The decrease in cash and investments segregated under federal regulations was primarily due to the changes in net cash owed to clients based on their account activity during the period.

Regulatory Requirements

As a result of its activities as a U.S. broker-dealer, Edward Jones is subject to the net capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and capital compliance rules of the Financial Industry Regulatory Authority ("FINRA"). Under the alternative method permitted by the rules, Edward Jones must maintain minimum net capital equal to the greater of $0.25 or 2% of aggregate debit items arising from client transactions. The net capital rules also provide that Edward Jones’ partnership capital may not be withdrawn if resulting net capital would be less than minimum requirements. Additionally, certain withdrawals require the approval of the SEC and FINRA to the extent they exceed defined levels, even though such withdrawals would not cause net capital to be less than minimum requirements.

 

EJ Canada is a registered broker-dealer regulated by the Canadian Investment Regulatory Organization ("CIRO"). Under the regulations prescribed by CIRO, EJ Canada is required to maintain minimum levels of risk-adjusted capital, which are dependent on the nature of EJ Canada's assets and results of operations.

 

The following table shows the Partnership’s capital figures for the U.S. and Canada broker-dealer subsidiaries as of:

 

 

 

September 27, 2024

 

 

December 31, 2023

 

 

% Change

 

U.S.:

 

 

 

 

 

 

 

 

 

Net capital

 

$

1,383

 

 

$

981

 

 

 

41

%

Net capital in excess of the minimum required

 

$

1,320

 

 

$

919

 

 

 

44

%

Net capital as a percentage of aggregate debit
   items

 

 

43.6

%

 

 

31.7

%

 

 

38

%

Net capital after anticipated capital withdrawals,
   as a percentage of aggregate debit items

 

 

12.9

%

 

 

13.0

%

 

 

-1

%

 

 

 

 

 

 

 

 

 

 

Canada:

 

 

 

 

 

 

 

 

 

Regulatory risk-adjusted capital

 

$

101

 

 

$

136

 

 

 

-26

%

Regulatory risk-adjusted capital in excess of
   the minimum required

 

$

94

 

 

$

134

 

 

 

-30

%

 

U.S. net capital, Canada regulatory risk-adjusted capital and the related capital percentages may fluctuate on a daily basis.

 

31


PART I. FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

THE EFFECTS OF INFLATION

 

The Partnership’s net assets are primarily monetary, consisting of cash and cash equivalents, cash and investments segregated under federal regulations, firm-owned securities, and receivables, less liabilities. Monetary net assets are primarily liquid in nature and would not be significantly affected by inflation. Inflation and future expectations of inflation influence securities prices, as well as activity levels in the securities markets. As a result, profitability and capital may be impacted by inflation and inflationary expectations. Additionally, inflation’s impact on the Partnership’s operating expenses may affect profitability to the extent that additional costs are not recovered through attracting new clients, gathering new assets or raising prices of services offered by the Partnership to increase revenue.

 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and in particular Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of U.S. securities laws. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “will,” “should,” and other expressions which predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Partnership. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Partnership to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

 

Some of the factors that might cause differences between forward-looking statements and actual events include, but are not limited to, the following: (1) general economic conditions, including inflation, an economic downturn, a recession or volatility in the U.S. and/or global securities markets, actions of the U.S. Federal Reserve and/or central banks outside of the United States and economic effects of international geopolitical conflicts, the U.S. federal debt ceiling, widespread health epidemics or pandemics or other major world events; (2) actions of competitors; (3) the Partnership's ability to attract and retain qualified financial advisors and other employees; (4) changes in interest rates; (5) regulatory actions; (6) changes in legislation or regulation; (7) litigation; (8) the ability of clients, other broker-dealers, banks, depositories and clearing organizations to fulfill contractual obligations; (9) changes in technology and other technology-related risks; (10) a fluctuation or decline in the fair value of securities; and (11) the risks discussed under Part I, Item 1A – Risk Factors in the Partnership’s Annual Report. These forward-looking statements were based on information, plans, and estimates at the date of this report, and the Partnership does not undertake to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as required by law.

32


PART I. FINANCIAL INFORMATION

 

ITEM 3. quantitative and qualitative disclosures about market RISK

Various levels of management within the Partnership manage the Partnership’s risk exposure. Position limits in inventory accounts are established and monitored on an ongoing basis. Credit risk related to various financing activities is reduced by the industry practice of obtaining and maintaining collateral. The Partnership monitors its exposure to counterparty risk through the use of credit exposure information, the monitoring of collateral values and the establishment of credit limits. For further discussion of monitoring, see the Risk Management discussion in Part III, Item 10 – Directors, Executive Officers and Corporate Governance of the Partnership’s Annual Report. All amounts are presented in millions, except as otherwise noted.

The Partnership is exposed to market risk from changes in interest rates. Such changes in interest rates impact the income from interest-earning assets, primarily client margin loans and investments, which are primarily comprised of cash and cash equivalents, investments segregated under federal regulations, certain investment securities and securities purchased under agreements to resell. Client margin loans and investments averaged $3.1 billion and $17.3 billion, respectively, for the nine-month period ended September 27, 2024 and earned interest at an average annual rate of approximately 827 and 493 basis points (8.27% and 4.93%), respectively, during the first nine months of 2024. Changes in interest rates also have an impact on the expense related to the liabilities that finance these assets, such as amounts payable to clients.

The Partnership performed an analysis of its financial instruments and assessed the related interest rate risk and materiality in accordance with the SEC rules. To estimate the impact of a 100-basis point (1.00%) change on net interest income, the Partnership uses a forecasting model to assess the sensitivity of net interest income to the movements in interest rates. The model estimates the sensitivity by calculating interest income and interest expense in a balance sheet environment using current balances at the end of the reporting period. Assumptions used in the model include the interest rate movement, along with interest related risks such as pricing spreads and the Partnership's determined returns on client cash accounts. Under current and expected market conditions, and based on current levels of interest-earning assets and the liabilities that finance those assets, the Partnership estimates that a 100-basis point (1.00%) increase in short-term interest rates could increase its annual net interest income by approximately $75. Conversely, the Partnership estimates that a 100-basis point (1.00%) decrease in short-term interest rates could decrease the Partnership’s annual net interest income by approximately $122. This estimate reflects minimum contractual rates on certain balances. This analysis excludes client assets that are held off-balance sheet in the Money Market Fund and at third-party banks participating in the Partnership's Insured Bank Deposit program.

ITEM 4. controls and procedures

The Partnership maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Partnership in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including the Partnership’s certifying officers, as appropriate to allow timely decisions regarding required disclosure.

Based upon an evaluation performed as of the end of the period covered by this report, the Partnership’s certifying officers, the Chief Executive Officer and the Chief Financial Officer, have concluded that the Partnership’s disclosure controls and procedures were effective as of September 27, 2024.

There have been no changes in the Partnership’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

33


 

PART II. OTHER INFORMATION

 

 

The information in Part I, Item 1, Note 7 supplements the discussion in Item 3 – Legal Proceedings in the Partnership's Annual Report.

 

ITEM 1A. RISK FACTORS

 

For information regarding risk factors affecting the Partnership, please see the language in Part I, Item 2 – Forward-looking Statements of this Quarterly Report on Form 10-Q and the discussion in Part I, Item 1A – Risk Factors of the Partnership's Annual Report.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

The Partnership issued $0.3 million of subordinated limited partnership interests (“SLP Interests”), which are described in the Partnership Agreement, to retiring general partners during the third quarter of 2024. The Partnership issued the SLP Interests pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended, in privately negotiated transactions and not pursuant to a public offering or general solicitation.

34


PART II. OTHER INFORMATION

ITEM 6. Exhibits

Exhibit Number

 

Description

3.1

*

Twenty-Second Amended and Restated Agreement of Registered Limited Liability Limited Partnership, dated as of August 15, 2023, incorporated by reference from Exhibit 3.1 to The Jones Financial Companies, L.L.L.P. Form 8-K dated August 16, 2023.

3.2

*

Twenty-Second Amended and Restated Certificate of Limited Partnership of the Jones Financial Companies, L.L.L.P., dated February 22, 2022, incorporated by reference from Exhibit 3.2 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended March 25, 2022.

3.3

*

First Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated March 24, 2022, incorporated by reference from Exhibit 3.3 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended March 25, 2022.

3.4

*

Second Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated April 20, 2022, incorporated by reference from Exhibit 3.4 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended March 25, 2022.

3.5

*

Third Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated May 24, 2022, incorporated by reference from Exhibit 3.5 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 24, 2022.

3.6

*

Fourth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated June 23, 2022, incorporated by reference from Exhibit 3.6 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 24, 2022.

3.7

*

Fifth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated July 21, 2022, incorporated by reference from Exhibit 3.7 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 24, 2022.

3.8

*

Sixth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated September 15, 2022, incorporated by reference from Exhibit 3.8 to The Jones Financial Companies, L.L.L.P Form 10-Q for the quarterly period ended September 30, 2022.

3.9

*

Seventh Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated October 16, 2022, incorporated by reference from Exhibit 3.9 to The Jones Financial Companies, L.L.L.P Form 10-Q for the quarterly period ended September 30, 2022.

3.10

*


Eighth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated November 21, 2022, incorporated by reference from Exhibit 3.10 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2022. 

3.11

*

 

Ninth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated December 21, 2022, incorporated by reference from Exhibit 3.11 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2022.

3.12

*


Tenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated January 25, 2023, incorporated by reference from Exhibit 3.12 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2022. 

3.13

*

 

Eleventh Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated February 23, 2023, incorporated by reference from Exhibit 3.13 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2022.

35


PART II. OTHER INFORMATION

Item 6. Exhibits, continued

3.14

*

Twelfth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated March 16, 2023, incorporated by reference from Exhibit 3.14 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended March 31, 2023.

3.15

*

Thirteenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated April 18, 2023, incorporated by reference from Exhibit 3.15 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended March 31, 2023.

3.16

*

Fourteenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated May 18, 2023, incorporated by reference from Exhibit 3.16 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 30, 2023.

3.17

*

Fifteenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated June 22, 2023, incorporated by reference from Exhibit 3.17 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 30, 2023.

3.18

*

Sixteenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated July 20, 2023, incorporated by reference from Exhibit 3.18 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 30, 2023.

3.19

*

Seventeenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated August 24, 2023, incorporated by reference from Exhibit 3.19 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended September 29, 2023.

3.20

*

Eighteenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated September 21, 2023, incorporated by reference from Exhibit 3.20 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended September 29, 2023.

3.21

*

Nineteenth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated October 19, 2023, incorporated by reference from Exhibit 3.21 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended September 29, 2023.

3.22

*

 

Twentieth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated November 20, 2023, incorporated by reference from Exhibit 3.22 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2023.

3.23

*

 

Twenty-First Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated December 20, 2023, incorporated by reference from Exhibit 3.23 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2023.

3.24

*

 

Twenty-Second Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated January 25, 2024, incorporated by reference from Exhibit 3.24 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2023.

3.25

*

 

Twenty-Third Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated February 20, 2024, incorporated by reference from Exhibit 3.25 to The Jones Financial Companies, L.L.L.P. Form 10-K for the year ended December 31, 2023.

3.26

*

 

Twenty-Fourth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated April 19, 2024, incorporated by reference from Exhibit 3.26 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended March 29, 2024.

36


PART II. OTHER INFORMATION

Item 6. Exhibits, continued

3.27

*

Twenty-Fifth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated May 16, 2024, incorporated by reference from Exhibit 3.27 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 28, 2024.

3.28

*

Twenty-Sixth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated June 25, 2024, incorporated by reference from Exhibit 3.28 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 28, 2024.

3.29

*

Twenty-Seventh Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated July 18, 2024, incorporated by reference from Exhibit 3.29 to The Jones Financial Companies, L.L.L.P. Form 10-Q for the quarterly period ended June 28, 2024.

3.30

**

Twenty-Eighth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated August 20, 2024.

3.31

**

Twenty-Ninth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated September 17, 2024.

3.32

**

Thirtieth Amendment of Twenty-Second Restated Certificate of Limited Partnership of The Jones Financial Companies, L.L.L.P., dated October 22, 2024.

31.1

**

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

31.2

**

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32.1

**

Certification of Chief Executive Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2

**

Certification of Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

**

Inline XBRL Instance Document

104

**

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

 

 

 

* Incorporated by reference to previously filed exhibits.

** Filed herewith.

37


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE JONES FINANCIAL COMPANIES, L.L.L.P.

 

 

 

By:

 

/s/ Penny Pennington

 

 

Penny Pennington

 

 

Managing Partner (Principal Executive Officer)

 

 

November 8, 2024

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated:

Signatures

 

Title

 

Date

 

 

 

 

 

/s/ Penny Pennington

 

Managing Partner

(Principal Executive Officer)

 

November 8, 2024

Penny Pennington

 

 

 

 

 

/s/ Andrew T. Miedler

 

Chief Financial Officer

(Principal Financial and

Accounting Officer)

 

November 8, 2024

Andrew T. Miedler

 

38