Brokerage firm consents to $350,000 fine for overcharging more than 20,000
fee-based customers approximately $2.4 million in erroneous fees.
By Chad M. Kohler, Esq.
The Financial Industry Regulatory Authority (FINRA), the self-regulatory
organization that oversees brokerage firms, has ordered Fidelity Investments
to pay a $350,000 fine after the firm allegedly overcharged 20,663 customers
approximately $2.4 million in various fees and other expenses.
According to a
settlement reached with the regulator, from January 2006 to September 2013, Fidelity
did not have reasonable supervisory policies and procedures in place to
ensure that customers were charged accurate fees for accounts managed
by third-party investment advisers. Fidelity is one of the largest custodians
of customer assets for third-party investment advisers in the U.S.
Fidelity's supervisory failures resulted in erroneous and duplicate
fees charged in certain fee-based customer accounts and certain accounts
managed by third-party wrap providers. Erroneous markups were also charged
on certain fixed-income investments.
FINRA said the overcharges resulted from a lapse in supervision over how
Fidelity applied fees to customers who are charged based on a percentage
of their assets rather than on a per transaction basis.
Among the many problems cited by FINRA was that Fidelity did not clearly
delegate responsibility for the supervision of fee-based brokerage accounts.
"In fact, until 2013, the firm did not designate a supervisory principal
to oversee its asset-based pricing program," according to FINRA.
In consenting to the $350,000 fine, Fidelity neither admitted nor denied
any wrongdoing. According to a Fidelity spokesperson, all customers who
were overcharged have been reimbursed.