FINRA Fines Fidelity $350K for Overcharging More than 20,000 Clients $2.4M

The Financial Industry Regulatory Authority says that Fidelity Investments must pay $350,000 for overcharging thousands of clients $2.4 million for transactions involving fee-based accounts in its Institutional Wealth Services Group. The overcharges are said to have occurred from 1/06 to 9/13. The group offers brokerage and trading services to investment advisers and their clients.

According to the self-regulatory organization, the inappropriate charges happened because of a supervisory oversight involving the way that Fidelity applies fees under its asset-based pricing model. The model typically charges according to assets, not transactions.

FINRA says that until 2013, the financial firm did not have a designated supervisory principal to oversee the group’s asset-based pricing program. As a result, a number of clients may have been charged excess commissions beyond the asset-based management fee or were double billed.

Fidelity was the one that identified the issue in 2012 and notified FINRA. The firm also paid back all of the clients who were affected. According to a firm spokesperson, about 1.5% of brokerage accounts held for investment advisers were impacted, with most getting a reimbursement of under $100.

Fidelity settled FINRA’s claims without denying or admitting to the SRO’s findings.

In other Fidelity Investment news, the fund manager and eight others are getting ready to launch a dark pool. While Fidelity is leading the effort to set up the private trading venue that would benefit mutual fund shareholders, other money managers involved include J. P. Morgan Chase & Co. (JPM), BlackRock Inc. (BLK), T-Rowe Price Group Inc. (TROW), and Bank of New York Mellon Corp. (BNK).

The market-called Luminex-would allow in asset managers wanting to trade big share volumes at once.

Fidelity-backed group unveils ‘dark pool’ for big stock trades, The Boston Globe, January 20, 2015

Fidelity, other major fund managers to launch stocks dark pool, Reuters, January 19, 2015

Fidelity fined $350,000 in billing snafu, InvestmentNews, January 20, 2015

More Blog Posts:
Fidelity Investments Settles Class Action Lawsuits Over 401(K) Plan for $12 million, Stockbroker Fraud Blog, September 5, 2014
Investor Files Securities Case Against Fidelity Over Float Income Investments Involving 401(K)s, Institutional Investor Securities Blog, May 6, 2013
FINRA Orders Pershing to Pay $3M Fine for Customer Protection Rule Violations, Stockbroker Fraud Blog, January 7, 2015