Fidelity Investments - Regulatory Troubles

Regulatory Troubles

U.S. brokerages regulator NASD fined four FMR-affiliated broker-dealers $3.75 million for alleged registration, supervision and e-mail retention violations in February 2007. The broker-dealers settled without admitting or denying the charges.

Fidelity Brokerage was ordered to pay $2 million to settle charges that employees altered and destroyed documents in 21 of its 88 branch offices from January 2001 to July 2002. Fidelity has internal inspections every year to make sure it is complying with federal regulations. The Securities and Exchange Commission accused that Fidelity management pressured branch employees to have perfect inspections and gave advance notice of the inspections and that at least 62 employees destroyed or altered potentially improper documents maintained at branch offices including new account applications, letters of authorization and variable annuity forms.

In May 2007, NASD fined two Fidelity broker-dealers $400,000 for preparing and distributing misleading sales literature promoting Fidelity's Destiny I and II Systematic Investment Plans, which were sold primarily to U.S. military personnel. As part of the settlement, for the next five years, the two broker-dealers - Fidelity Investments Institutional Services Company, Inc. of Smithfield, RI and Fidelity Distributors Corporation of Boston - are required to notify Destiny Plan holders who want to increase their investments in existing Destiny Plans that additional shares of the underlying fund can be purchased outside the Destiny Plans without paying the additional creation and sales charges of up to 50 percent on the first year's payments.