In an administrative complaint, Massachusetts charged Fidelity Brokerage Services with dishonest and unethical behavior for letting unregistered investment advisors perform trades on the Fidelity broker-dealer platform, thus creating fees for both the firm and the unregistered advisors.
At minimum, thirteen unregistered Massachusetts investment advisors used Fidelity’s platform, according to William Galvin, secretary of the commonwealth.
For those advisers, “Fidelity served as a haven from regulatory oversight as it ignored blatant unregistered investment advisory activity,” according to a statement from Galvin’s office.
Fidelity believes it has done nothing wrong. “We do not believe that Fidelity has violated any laws or regulations in connection with this matter,” said Adam Banker, a Fidelity spokesman. “We look forward to reviewing the details of this matter and addressing them appropriately.”
“Fidelity, of all companies, knows full well the range of investor protection provisions resulting from regulatory oversight,” Galvin stated. “For them to knowingly allow unregistered activity on their broker-dealer platform is a profound failure of their regulatory obligations.”
In one case, more than twenty Fidelity customers paid one unregistered investment adviser who was trading on their behalf $732,000 in advisory fees over a 10-year period, according to the complaint. The complaint alleges that Fidelity had knowledge that the individual was acting as an adviser during that entire period and encouraged his trading activity by providing the purported adviser, who made thousands of trades in the accounts of his clients, with gifts such as frequent flyer miles and tickets to a professional sporting event.
Fidelity had policies in place since 2011 that specified red flag risk warnings for certain levels of third-party trading, but those were ignored until recently, according to Galvin.
If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.