Fidelity Investments has agreed to pay an $8 million fine to settle Securities and Exchange Commission charges that the company failed to properly supervise its stock traders that had improperly received gifts. 13 current and ex-Fidelity employees are targeted in the SEC investigation.
The gifts were given to traders by outside brokers who were soliciting Fidelity’s business. Fidelity has had a policy that prohibits employees from engaging in business transactions influenced by gifts received. Employees are also not allowed to receive gifts valued at more $100 over a one-year period.
The SEC alleges that accepting the gifts affected the Fidelity traders’ ability to obtain the best stock trades for Fidelity’s mutual fund customers.
Fidelity, the largest mutual fund manager in the United States, says it will pay $42 million to its mutual funds and pay a comparable amount to institutional clients that were handled by the brokers involved. Fidelity is not accepting or denying wrongdoing by paying the $8 million SEC fine. It also maintains that the government did not find that anyone had been hurt financially by the gift taking.
Expensive Travel Trips & Tickets to Sporting and Musical Events
Former star fund manager Peter Lynch allegedly received almost $16,000 in free tickets to high profile events, including a U2 concert, a Ryder Cup golf match, “The Lion King,” and “The Nutcracker.” One former fidelity trader, Thomas Bruderman, reportedly received $450,000 worth of gifts and travel, as well as marijuana and ecstasy pills from brokers.
Former head trader Scott DeSano reportedly knew these improper activities were taking place. He also received gifts from brokers, including trips on private jets to exclusive golf resorts and excursions to Las Vegas and Mexico. DeSano’s ex-Fidelity supervisor, Bart A. Granier, who has already settled SEC charges, allegedly accepted $38,000 in gifts from outside brokers.
Tickets to Super Bowl games, the World Series, Rolling Stones concerts, and Wimbledon tennis games were also among the gifts that the SEC said Fidelity brokers had improperly received from outside brokers between 2002 and October 2004.
Fidelity says it has taken a number of steps to curb such improper activities, including the creation of stricter gift policies, disciplining or terminating workers, and creating better oversight measures. Fidelity says that the majority of the 13 employees named in the SEC probe no longer work at the company.
Related Web Resources:
Fidelity Fined in SEC Probe of Private Jets, Escorts, Ecstasy, Bloomberg, March 6, 2008
Fidelity fined $8M in gifts investigation, USA Today/AP, March 6, 2008