Fidelity subsidiary National Financial Services agreed to pay a total of $2.46 million to settle charges by the Securities and Exchange Commission that it failed to deliver final prospectuses to investors who paid more than $148 million in FuelCell Energy stock.
Without admitting or denying the SEC’s findings, NFS agreed to disgorge $797,905 in commissions, pay prejudgment interest of $163,288 and pay a penalty of $1.5 million, according to an SEC order filed Thursday.
In a separate order filed the same day, the regulator said it recognized FuelCell’s “cooperation and self-report, both of which the SEC considered in determining not to impose a penalty” against that firm.
Both companies also agreed to cease and desist from committing or causing future securities violations, according to the orders.
Asked to comment on the SEC’s claims Wednesday, a Fidelity spokeswoman said only that “National Financial Services is pleased to resolve this matter.” FuelCell did not immediately respond to a request for comment.
NFS sold FuelCell common stock to the public on behalf of the issuer in five at-the-market delayed shelf offerings, according to the SEC. For each offering, FuelCell filed a base prospectus with the registration statement, but failed to file a final prospectus as required when it took the securities “off the shelf” and sold them into the market, the regulator said.
The order charging NFS found that, as the statutory underwriter, NFS had an obligation to ensure delivery of final prospectuses, which describe the specific type and quantity of securities being offered, the specific manner and timing of distribution, and the nature and terms of agreements with underwriters, dealers and agents, the SEC said.
That order further found that NFS had no policies and procedures in place at the trading desk conducting the sales that could have prevented or detected the violations, and that NFS did not take timely and effective corrective action when certain underlying facts concerning these sales came to the attention of compliance and legal personnel at NFS, the SEC alleged.
The SEC’s orders found that NFS and FuelCell violated the prospectus delivery provisions of Section 5(b) of the Securities Act of 1933. The order charging NFS found it violated the underwriter prospectus delivery provisions of Securities Act Rule 173, and failed reasonably to supervise the traders that sold the FuelCell securities within the meaning of Section 15(b)(4)(E) of the Securities Exchange Act of 1934 and Section 203(e)(6) of the Investment Advisers Act of 1940, the regulator said.