Articles Tagged with Fidelity

shutterstock_82103137The Law offices of Gana Weinstein LLP are pleased to announce that their client recently received a FINRA arbitration award of $400,000 in case where the former Fidelity Brokerage Services LLC (Fidelity) brought claims against his former employer for common law negligence and failure to supervise.

The former broker’s claims revolved around allegations that Fidelity failed to follow and/or implement appropriate procedures to handle the transitioning of his insurance licenses to Fidelity upon his hire.  The broker claimed damages in the form of lost wages, lost wage opportunity, delayed career growth, and less attractive job prospects.

The attorneys at Gana Weinstein LLP handle a variety of securities related disputes including employment and customer disputes.  Please call for a free consultation.

shutterstock_175320083The investor advocacy bar association PIABA (the Public Investors Arbitration Bar Association) has recently issued a report called “Major Investor Losses Due to Conflicted Advice: Brokerage Industry Advertising Creates the Illusion of Fiduciary Duty.” The PIABA report argues that the brokerage industry uses false advertising to convey to investors that the firms have a fiduciary duty to their clients only then to do a 180 turn when sued to claim that no such duty exists.

According to the report, some of the largest firms in the United States are falsely advertise in this fashion including Merrill Lynch, Wells Fargo, Morgan Stanley, UBS, Fidelity, Ameriprise, Allstate Financial, Berthel Fisher, and Charles Schwab. The report claimed that all of these firms “advertise in a fashion that is designed to lull investors into the belief that they are being offered the services of a fiduciary.”

In the wake of the financial crisis of 2008, the Dodd-Frank legislation authorized the Securities Exchange Commission (SEC) to pass a fiduciary duty rule that would apply to brokers, as opposed to only financial advisors. Most investors do not realize and are usually shocked to learn that there broker only has an obligation to recommend “suitable” investments, and not to work in their client’s best interests. Currently, the fiduciary duty rule only applies to financial advisors (and brokers under certain circumstances).

shutterstock_172034843Recently, the law office of Gana Weinstein LLP filed a claim (Complaint) on behalf of its client against Fidelity Brokerage Services (Fidelity) alleging that Fidelity was negligent when one of its registered representatives made an unsuitable recommendation to the client.  The client purchased a stock in the company Lakeland Industries (Ticker Symbol: LAKE) believing that the stock was overvalued and initiated a short position to attempt to profit from the stock’s decline.

A short position allows an investor to sell an investment that the investor does not actually possess. Instead, the investor receives the cash proceeds from the sale and then is obligated, at a future date, to buy back the shares borrowed.  If the value of the stock declines over time then the investor can buy back the stock at a cheaper price than what the investor sold the stock for, making a profit on the difference. Conversely, if the stock’s value increases the investor will have to buy back the stock at a higher value and would lose money.

From October 1, 2014, through October 10, 2014, the client sold short 10,100 shares of LAKE in his Fidelity account. Over the next few days the shares of LAKE increased causing margin calls in the client’s account. The client alleged that he had already added funds to his account to cover previous margin calls. The client wanted to hold the LAKE position and made it clear to Fidelity that he would continue to add funds to cover any margin calls to avoid having his LAKE position liquidated by Fidelity.

On March 19, 2013, a former employee of Fidelity Investments filed suit in the U.S. District Court in Boston, Massachusetts against her former employer alleging self-dealing with respect to the management of the FMR LLC Profit Sharing Plan, Fidelity’s 401(k) plan.  In September, twenty-six additional current and former Fidelity employees joined a proposed class action lawsuit against Fidelity. The complaint captioned, Bilewicz v. Fidelity Investments, alleges that the FMR LLC Profit Sharing Plain offered expensive Fidelity mutual funds despite the availability of lower-fee mutual funds within Fidelity’s own investment offerings and the offerings of outside providers.

Fidelity’s 401(k) plan holds approximately $8.5 billion in assets for more than 50,000 of its employees. Fidelity generally makes annual profit sharing contributions to the plan in addition to matching up to 7% of its employees’ salary contributions.

The Employee Retirement Income Security Act (ERISA) creates a fiduciary duty for 401(k) plans, meaning Fidelity, and any other 401(k) plan provider, must act in the best interest of its employee investors. The complaint in this case alleges that Fidelity and some of its officers failed to uphold thier fiduciary duty with respect to selecting, evaluating, monitoring, and removing investment options from the Fidelity 401(k) Plan.  The complaint alleges that Fidelity and certain officers selected high-fee Fidelity mutual fund products that financially benefited Fidelity instead of acting in the best interest of their employees.

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