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Fidelity Brokerage Fined $375,000 for Misleading Advertising, Supervisory Failures Related to Mutual Fund Sales

The Financial Industry Regulatory Authority has fined Fidelity Brokerage Services, LLC and Fidelity Investments Institutional Services Company, Inc. $375,000 for providing misleading sales and advertising materials and multiple supervisory violations related to these sales.

FINRA Case #2008013791601

FINRA alleged that in 2007, a Fidelity Investments report inaccurately described its income mutual fund, the Fidelity Ultra Short Bond Fund, as a "solid, lower risk option, ideal for customers holding cash for short-term goals such as purchasing a home or a car." FINRA alleged that in light of 2007's sub-prime crisis, Fidelity's report failed to adequately address risks associated with the fund, with inadequate reference to the fund's reliance and investment on mortgage-backed securities, which were especially susceptible to the crisis and influenced the fund's net asset value, which had begun to decrease in June of 2007.

FINRA alleged that a 2008 document using data based on past performance and algorithms failed to take into account the mid-2007 - early 2008 fund's volatility caused by the aforementioned sub-prime debt crisis. FINRA found that despite the added riskiness introduced by the crisis and the investments held in the fund, Fidelity still indicated the fund was "low" risk.

FINRA also found that Fidelity inserted into their advertising unqualified promises of future fund growth and performance and that this mistake misled customers by implying the fund's manager could control this future performance.

Finally, FINRA discovered alleged supervisory violations, claiming that Fidelity's supervisory procedures in regards to the review and approval process of the violative sales materials were not reasonable in achieving compliance with FINRA/NASD rules, regulations and laws. FINRA found that the review process did not include adequate surveillance and follow-up so as to ensure continued compliance.

If you invested with Fidelity Brokerage, Fidelity Investments or another firm or with another broker whose sales and advertisement materials were misleading and the subsequent investment activity has been harmful to your financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

The Law Offices of Jonathan W. Evans & Associates - California Securities Fraud Attorney
Located at 12711 Ventura Boulevard, Suite #440 Studio City, CA 91604. View Map
Phone: (800) 699-1881 | Local Phone: (818) 760-9880.