Massachusetts charges Fidelity with ‘dishonest’ conduct
BOSTON (AP) — The top securities regulator in Massachusetts on Monday charged Fidelity Investments with “dishonest and unethical behavior” for allowing at least 13 unregistered investment advisers to use its online broker-dealer platform.
Just one of those unregistered advisers reaped more than $730,000 in fees on trades over 10 years, Secretary of State William Galvin said in announcing the administrative complaint against Fidelity Brokerage Service LLC.
“Fidelity, of all companies, knows full well the range of investor protection provisions resulting from regulatory oversight. For them to knowingly allow unregistered activity on their broker-dealer platform is a profound failure of their regulatory obligations,” Galvin said.
Fidelity is not charged with any criminal wrongdoing.
“We can assure you that we take very seriously the trust investors place with us and our obligation to manage our business in accordance with all relevant laws and financial industry regulation,” Fidelity spokesman Adam Banker said in a statement.
“We do not believe that Fidelity has violated any laws or regulations in connection with this matter,” he said. “We look forward to reviewing the details of this matter and addressing them appropriately.”
Galvin said Fidelity ignored its own policies on third party trading.
“The complete failure to detect and prevent unregistered activity has left Massachusetts individual investors, including Fidelity’s own customers, at risk and is a clear case of dishonest and unethical behavior,” he said.
The complaint calls for Fidelity to cease the practice, hire an independent consultant to review the matter, make recommended changes to company policies and procedures and pay an administrative fine.
All unregistered advisers have since had their trading authorizations revoked.
Fidelity has 30 days to respond to the complaint, a Galvin spokesman said.
Boston-based Fidelity is one of the world’s biggest investors, managing 401(k) and other retirement and investment accounts for 24 million people, with $2.1 trillion in assets under management, according to the company’s website.