The Financial Industry Regulatory Authority has fined a former Fidelity representative $5,000 and suspended him for three months for marketing and selling an automated trading algorithm for the foreign exchange market — an outside business activity.
According to FINRA's order, from March 7, 2019, through Aug. 29, 2024, Evan Von Scales was registered with FINRA through an association with Fidelity Brokerage Services LLC.
Between October and December 2023, Scales engaged in an outside business activity without disclosing the business to Fidelity.
"Scales created an LLC for this business and promoted the algorithm on various social media platforms," according to the order.
"Ultimately, nine individuals purchased the algorithm for $2,000 each, though two customers later requested and were granted refunds. In total, Scales received approximately $13,000 from sales of the algorithm after deducting refunds and transaction fees," FINRA said. "In December 2023, Scales ceased operating the business."
On Aug. 29, 2024, Fidelity filed a Form U5 disclosing that Scales had “resigned after an interview in which he acknowledged engaging in investment-related activities and communications outside the firm without disclosure to or approval by the firm and receiving compensation outside the firm from certain individuals related to those activities,” FINRA's order states.
The matter originated from the Form U5 filed by Fidelity.
A violation of FINRA Rule 3270 also constitutes a violation of FINRA Rule 2010, which requires that members and associated persons observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.
Throughout the relevant period, Fidelity’s policies and procedures required that registered reps disclose outside business activities to the firm, and receive approval from the firm, prior to engaging in them.
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