Investors Hit Fidelity With FINRA Claim Over Advisor Accused of Losing $11M

A Fidelity representative didn't immediately respond Thursday to an email seeking comment.

The action follows a $6 million settlement reached by the New Hampshire Bureau of Securities Regulation against Chadwick in 2024, and a consent order that Vermont regulators obtained against the former advisor in late 2023 for breaching fiduciary duties and investing in unsuitable, high-risk products. While Vermont ordered Chadwick to pay victims over $1.6 million in restitution, he hadn't done so by November last year, regulators said.

Vermont and New Hampshire have permanently barred Chadwick from securities licensure in the states, according to the consent orders settling proceedings against Chadwick, who neither admitted nor denied the allegations.

The Peiffer law firm also cited pending 2022 allegations against Chadwick in Vermont that he impersonated clients and provided investment advice despite no longer being registered.

“Using Fidelity’s platform, Thomas Chadwick lost his clients life savings through extremely risky investments and committed fraud," Jason Kane, partner at Peiffer Wolf, said in the press release. "Despite obvious red flags, they went unnoticed by Fidelity as it failed to protect its customers. Chadwick’s path of destruction includes dozens of victims across two states and totals over $11 million. If Fidelity had appropriate supervisory systems in place, this never would have happened."

Richard Bates of Enfield, New Hampshire, lost hundreds of thousands of dollars, according to the law firm.

“I considered Tom Chadwick a friend as well as an advisor," he said in the lawyers' press release. "When we retired, it felt comfortable and natural to trust Chadwick, who invested through industry icon Fidelity, to manage our retirement portfolio. Instead, Chadwick’s negligent and improper mismanagement and Fidelity’s lack of oversight cost us the bulk of our savings, forcing us both back to work in order to pay our bills and shattering our retirement dreams. The emotional distress has been devastating.”

Risky Trades and Red Flags

In 2001, Chadwick opened Chadwick & D’Amato, an investment advisory firm in New London, New Hampshire, registered with Fidelity serving elderly and retired clients with a low to moderate tolerance for risk and principal losses, according to the law firm. Chadwick & D’Amato clients were required to open Fidelity brokerage accounts to give Chadwick access to their portfolios, the lawyers said.

SEC forms indicate Chadwick managed investments for nearly 100 individuals, overseeing more than $60 million in assets.

From mid-2019 to early 2020, he invested client assets into a risky, complex securities product known as Credit Suisse XLinks Monthly Pay 2xLeveraged Mortgage REIT Exchange Traded Notes due July 11, 2036, or REML, which was suitable only for aggressive investors willing to potentially lose their entire investment, according to the law firm.

REML ceased trading in December 2021, locking in Chadwick’s clients’ losses, which were exacerbated by Chadwick's concentrating his customer base in this single security, the lawyers alleged.

Chadwick’s activities should have raised red flags for Fidelity, the lawyers suggest. "Fidelity had a duty to properly tailor its supervisory systems to closely scrutinize advisory client accounts and all persons trading in these accounts, yet it continuously failed to fulfill its supervisory duties. Fidelity’s failure to properly fulfill its supervisory duties enabled Chadwick and his firm to commit their misconduct and caused his clients to sustain the substantial losses that they did," their release said.

After Chadwick terminated his investment advisor registrations in late December 2021, he continued to meet with and email clients and discuss their accounts, the lawyers allege. Fidelity terminated its relationship with Chadwick and his firm in 2021, but he continued to access their Fidelity accounts inappropriately, according to the law firm.

"Chadwick inappropriately accessed approximately 40 Fidelity customer accounts to purchase securities and engage in a pattern of securities trading across those accounts. This was yet another red flag that Fidelity failed to act upon until it was too late," the firm's release said.

In April 2022, Fidelity informed state securities regulators that a device that it believed belonged to Chadwick and his new consulting firm had accessed nearly 40 of Fidelity's customer accounts since Jan. 1, 2022 and that he was using the client login credentials to access them, the filing with FINRA contends, adding that Fidelity indicated a “pattern of trading” conducted in several accounts.

Fidelity indicated to Vermont that it had locked those accounts, forced password and login resets, and reassigned accounts numbers for the accounts, the filing states.

"Claimants contend that Fidelity failed, among other ways, in its obligation to supervise its brokerage business, including its design, implementation, and monitoring of its [anti-money laundering] system, with regards to failing to detect suspicious activities in connection with Chadwick’s handling of customer accounts," the filing says.

"Fidelity failed to supervise for these activities, and only detected these matters after responding to investigations by state regulators," the filing says. "Had Fidelity detected Chadwick’s improper conduct pursuant to its supervisory duties, Claimants and customer losses could have been lessened or prevented."

Chadwick didn't immediately respond Thursday to a voicemail left on a number associated with his former advisory firm.

Wealth Management and New Hampshire Public Radio reported earlier on the filing.

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