In the Matter of Fidelity Management & Research Company

Investment Advisers Act Release No. 2713 (2008)

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In the Matter of Fidelity Management & Research Company

Securities and Exchange Commission
Investment Advisers Act Release No. 2713 (2008)

CS

Facts

Fidelity Management & Research Company (FMR) was the investment adviser to the Fidelity family of mutual funds (Fidelity funds). Over a multi-year period, FMR senior executives and traders accepted approximately $1.6 million worth of travel, entertainment, and gifts (TEG) from brokerage firms that sought and obtained orders to purchase or sell securities for FMR’s advisory clients, including the Fidelity funds. The TEG included lavish trips by private jet, stays at luxury hotels, and tickets to premier sporting events and concerts. Another FMR executive, who was a prominent former Fidelity fund manager, requested tickets to two events from FMR traders who received the tickets from brokers. In addition, FMR traders sometimes steered trades to brokerage firms that employed the traders’ family members or significant others. FMR did not disclose these matters to its advisory clients, in public-disclosure documents filed with the Securities and Exchange Commission (SEC), or to the Fidelity funds’ trustees. FMR also did not maintain sufficient controls and procedures to detect and prevent its employees’ receipt of TEG from brokers. The SEC brought an administrative proceeding against FMR for violations of the Investment Company Act of 1940 (Company Act) and the Investment Advisers Act of 1940 (Advisers Act).

Rule of Law

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Holding and Reasoning ()

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