Former Fidelity Traders Settle Gift Scandal

The Securities and Exchange Commission (SEC) said eight former employees of Fidelity Investments’ equity trading desk will collectively pay more than $1 million to settle SEC charges for improperly receiving lavish gifts from brokers.

The former Fidelity employees accepted travel, entertainment, and gifts paid for by outside brokers courting business from Fidelity. The SEC also charged the three brokers and broker/dealer Lazard Capital Markets LLC, who settled the charges in October (see “SEC Charges B/D Firm for Improper Gifts to Fidelity Employees).

The SEC charged Fidelity and 12 of its now-former employees back in March (see “Fidelity to Pay $42M into Funds After Report Reveals Brokers’ Gifts to Traders). The remaining eight—including former vice president and head of the trading desk, Scott DeSano—who had not yet settled with the SEC have now reached a settlement after preliminary reports of doing so in October (see “Selling Ex-Fidelity Workers Strike Deal on Gift Probe)

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The SEC’s orders issued Thursday found that DeSano and former Fidelity equity traders Timothy Burnieika, David Donovan, Edward Driscoll, Jeffrey Harris, Christopher Horan, Steven Pascucci, and Kirk Smith violated the federal securities laws by accepting prohibited compensation from brokers. Some of the goods the traders received included private jet trips, lodging, and premium sports tickets, according to an SEC news release. In addition, the SEC found that DeSano was a cause of Fidelity’s failures to seek best execution for its clients and to disclose conflicts of interest to its clients, and that DeSano failed to supervise the 10 traders.

“By accepting improper gifts from brokers, these individuals squandered the most important commodity in the financial services industry—investor trust,” said George Curtis, the SEC’s deputy director of enforcement, in a statement.

More details of the settlement are available here.

Pension Relief Bill with RMD Moratorium Slides through Senate

A day after U.S. House lawmakers unanimously approved a sweeping pension reform measure, the Senate followed suit on Thursday with its own unanimous approval of the bill.

The House measure, H.R. 7237, which includes a one-year required minimum distribution (RMD) moratorium and a variety of pension funding provisions, passed out of the Senate as H.R. 6382, according to House and Senate records.

Long-time pension activist U.S. Senator Benjamin L. Cardin (D-Maryland) issued a statement late Thursday praising his Senate colleagues for moving the Pension Protection Technical Corrections Act of 2008 through the process on a rapid timetable.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

“This bill is critically important for millions of seniors who might have been penalized financially for our nation’s economic downturn,” Cardin said, in a statement. “If we had failed to pass this moratorium, seniors would have been forced to take a loss on their investments just because they reached age 70 세, after they worked hard all their lives to save for retirement.’

In addition to the RMD issue, the bill includes a variety of pension funding measures and other provisions being sought by retirement services industry trade groups.

Pension Smoothing Provisions

For example, the bill features:

  • clarification of pension plan “smoothing,” allowing plans to recognize unexpected asset gains and losses over 24 months;
  • multiemployer plan relief, permitting plan sponsors to elect to temporarily freeze the status of certain multiemployer plans at the same funding status held in the previous plan year;
  • a rule easing the requirement that would otherwise compel employers to restrict the accrual of pension benefits; and
  • improved transition to the new funding rules, in which the phased-in funding threshold would hold at 92% for another year.

Before the Senate action, the trade groups expressed kudos to the House lawmakers for acting quickly and called on members of the other Congressional chamber to follow suit (See “RMD Bill Includes PPA Technical Corrections).

«