The Markets December 4, 2006

Wilmington Trust Adds Fundamentally Weighted Funds to Lineup

Wilmington Trust has announced the addition of two new fundamentally weighted mutual funds to its lineup of domestic equity funds.
Reported by

According to the announcement, the Wilmington Fundamentally Weighted Large Company Fund and Wilmington Fundamentally Weighted Small Company Fund ascribe to an emerging investment approach, often referred to as fundamentally weighted index investing. This approach uses fundamental measures of a company’s size, such as net income, dividends, and free cash flow, to select securities.

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The firm anticipates the Wilmington Fundamentally Weighted Large Company Fund will hold several hundred stocks included in the Russell 1000 Index, while the Wilmington Fundamentally Weighted Small Company Fund will hold stocks included in the Russell 2000 Index.

Fundamental weighting aims to avoid overexposure to overvalued securities and underexposure to undervalued securities, the announcement said.

More information can be found at www.wilmingtontrust.com.

Compliance December 4, 2006

More Details Emerge in Fidelity Fraud Probe

In court papers filed last week, the Securities and Exchange Commission (SEC) revealed for the first time details of its two-year probe into possible fraud at Fidelity Investments.
Reported by

The Boston Globe reports the SEC said in the court filing that Fidelity “may have, directly or indirectly” defrauded some clients or prospective clients during a two-year period starting in 2002. The SEC said actions by Fidelity may have prevented customers from getting the best deals on stock trades.

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Among other activities, the court filing revealed the SEC is investigating whether former Fidelity trader David Donovan Jr. or members of his family used inside information to profit from stock trades, according to the Globe. The SEC said, on August 5, 2003, Donovan accessed internal information which showed Fidelity had pending orders to buy nearly 2 million shares of Covad Communications Group Inc. Donovan accessed information about Fidelity’s trading plans for Covad over 40 times even though he had no responsibility for trading Covad shares at the time.

According to the court papers, following access to the information, Donovan placed calls to his parents’ home, and within 15 minutes of two of the calls, trades in Covad were credited to a brokerage account in the name of Donovan’s mother. The SEC said, during a three-day period in August 2003, a total of 55,000 Covad shares were bought for Donovan’s mother’s account for less than $2 per share. The shares were sold a month later for an $89,775 profit, the newspaper said. Prior to that, the last trades in the account of Donovan’s mother took place in 2001.

The court filings do not accuse Donovan, his parents, or Fidelity of improper or illegal activity. In March 2005, Donovan told the Globe his mother’s trades in Covad had nothing to do with him and he did not profit from them.

In December 2004, the Globe reported the SEC was investigating whether Donovan steered business to his brother Peter Donovan who handled Fidelity business at Banc of America Securities in Boston. The investigation also looked into whether traders at Fidelity received free trips on private planes to Las Vegas, the Super Bowl, and golf courses in Florida, expensive wine, and other lavish perks from brokers who handled stock trades from the mutual fund company.

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