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Fidelity Ordered to Pay $500,000 Fine For Failing to Failing to Identify “Red Flags” Associated with Broker Theft

Fidelity Ordered to Pay $500,000 Fine For Failing to Failing to Identify “Red Flags” Associated with Broker Theft

Fidelity Ordered to Pay $500,000 Fine For Failing to Failing to Identify “Red Flags” Associated with Broker Theft 150 150 Rex Securities Law

December 18, 2015-

Fidelity Brokerage Services , entered into a Letter of Acceptance Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA) to resolve allegations that between August 2006 and May 2013 they failed to prevent or detect the conversion of more than a million dollars from nine customers, most of whom were senior citizens, by their broker Lisa A. Lewis, now a convicted felon serving 15 years in prison.

According to the AWC, from approximately August 2006 until her fraud was discovered in May 2013, Lisa A. Lewis pretended to be a Fidelity broker and systematically converted more than a million dollars from the accounts of nine ofthe Firm’s customers, eight of whom were senior citizens. Many of Lewis’s victims were former customers at another brokerage firm, from which she had been terminated following allegations of check-kiting and improperly borrowing money from customers. Lewis falsely told these former customers and other eventual victims that she was working for Fidelity and urged them to establish accounts at that firm. In reality, Lewis was never associated with Fidelity.

Per FINRA, Fidelity failed to detect or adequately follow up on multiple red flags related to Lewis’s scheme. For example, though Lewis’s victims were unrelated to one another, all of the individual and joint accounts established in their names at Fidelity shared one or more elements of common customer information associated with Lewis, such as a common email address, common physical address, or common phone number. Furthermore, all of the joint accounts listed Lewis as a beneficial owner. Except for an alert designed to identify multiple accounts sharing a common email address (discussed below), Fidelity lacked supervisory systems or procedures reasonably designed to detect these commonalities across these unrelated accounts

The Firm also overlooked red flags in telephone calls handled by its customer service call center during which Lewis impersonated customers to facilitate illicit fund transfers. For example, in some calls, call-center personnel did not become suspicious even after Lewis was unable to answer account-verification questions on file for the impersonated customer. On most occasions, the relevant calls were not appropriately elevated within the Firm for further investigation or review.

AWC No.  2014041374401

Fidelity was censured and fined $500,000. In addition Fidelity was ordered to pay restitution to affected customers in excess of $500,000.

 

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

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Rex Securities Law

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Florida-561 391 1900 

Texas-512-329-2870

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