The Financial Industry Regulatory Authority has fined Fidelity Brokerage Services, the broker-dealer for Fidelity Investments, $600,000 for failing to supervise an associated person's access to stock plan services accounts data as he converted money from 37 international SPS accounts for personal use.
The activity occurred from December 2012 to October 2020, according to FINRA's order.
"As a result, the firm failed to detect that, for nearly eight years, an associated person responsible for supporting the maintenance of SPS account data converted approximately $750,000 from 37 international plan participants," the order states.
The matter originated from FINRA’s investigation into the associated person’s conversion of funds from international SPS accounts, after Fidelity reported the misconduct to FINRA.
"The associated person was a member of a team responsible for supporting the day-to-day maintenance of SPS account data, resolving data inconsistencies, and handling data inquiries from companies and their employees," the order states. "The inquiries were communicated to the associated person by other business personnel. To perform these functions, the firm provided the associated person and his coworkers with access to SPS account data that allowed them to view and change various types of account information such as plan participants’ names, addresses, and bank instructions."
Fidelity’s WSPs prohibited its associated persons from accessing SPS account data "unless necessary to perform their job responsibilities and only permitted changes to SPS account data at the direction of plan sponsors and plan participants," the order states.
The firm "used a workflow management tool to log, track, and oversee these changes, but it did not monitor for or prevent associated persons from accessing or changing data without tracking it through the workflow management tool," the order states. "As a result, the associated person was able to evade detection by accessing and changing SPS account data without logging the changes in the workflow management tool for almost eight years."
In 37 international SPS accounts, the associated person "was able to use his data access to change the plan participant’s name to his own name or the name of a domestic SPS account he created and controlled and then link the international SPS account to (1) banking instructions for checks in his own name sent to a P.O. Box address located in his home state that he controlled or (2) wire instructions for the domestic SPS account he created and controlled," the order states.
Fidelity discovered the conversion after an international SPS plan participant contacted the firm with questions regarding transfers out of his account.
Fidelity "terminated the associated person, voluntarily notified FINRA of the misconduct prior to filing a Form U5 for the individual, initiated an internal investigation, and shortly thereafter made full restitution to the affected plan participants," FINRA said. "The firm subsequently implemented a process to surveil all outgoing money movements from international SPS accounts."
In a statement to ThinkAdvisor, a Fidelity spokesperson highlighted those efforts to remedy the situation and said the firm was "committed to operating with integrity."
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