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’)
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.