Fidelity Investments today agreed to pay an $8 million civil penalty as part of a final settlement with the SEC, which charged that Fidelity employees allowed gifts from brokers, rather than best execution, to influence how the company directed its trading orders.
The SEC alleged Fidelity and 13 current or former employees, including Fidelity trustee and Vice Chairman Peter Lynch, improperly accepted $1.6 million in travel, entertainment and other gifts from brokers, according to a news release from the SEC. As a result, the SEC charged, Fidelity failed to seek best execution, creating a serious risk of investor harm.
Fidelity did not admit or deny the SECs charges. In a company news release, Fidelity said the settlement concludes the regulatory investigations into these events, which took place more than three years ago. Fidelity noted that none of its employees cited by the SEC remains on the firms trading desk; most already left the firm. Along with Mr. Lynch, former manager of the Fidelity Magellan Fund, the SEC cited Bart A. Grenier, a senior vice president responsible for Fidelitys equity trading group. The SEC also noted that Messrs. Lynch and Grenier settled without admitting or denying the allegations. The SECs order against Mr. Lynch calls for him to pay $15,948 in disgorgement, along with prejudgment interest of $4,183. Its order calls on Mr. Grenier to pay disgorgement of $26,317 and a $25,000 penalty.
The SEC said Scott E. DeSano, former Fidelity senior vice president and head of global equity trading, and nine other current or former Fidelity equity traders still face SEC charges.