FINRA fines Fidelity Brokerage Services US$1 million for supervisory failures

Firm settles allegations it failed to detect fraud targeting seniors

By: James Langton
December 18, 2015 December 19, 2017
13:00

The U.S. Financial Industry Regulatory Authority (FINRA) has sanctioned Fidelity Brokerage Services LLC for failing to detect a fraudulent scheme targeting several of its clients.

FINRA announced on Friday that it has fined Fidelity Brokerage Services LLC US$500,000, and ordered it to pay almost US$530,000 in restitution for failing to detect or prevent the theft of more than US$1 million from nine of its customers, eight of whom were senior citizens.

Lisa Lewis posed as a Fidelity broker and targeted former customers from another brokerage firm from which she had been fired, obtaining their personal information, and systematically stealing from them, FINRA says in a statement.

According to FINRA, in June 2014, Lewis pleaded guilty to wire fraud, and was sentenced to 15 years in prison and was ordered to pay more than US$2 million in restitution to her victims.

FINRA found that Fidelity failed to detect, or to adequately follow up on multiple “red flags” related to Lewis’s scheme, the FINRA statement says, and the firm’s inadequate supervisory systems and procedures contributed to the failure to prevent the fraud. Fidelity Brokerage Services settled the case, neither admitting nor denying the charges, but consented to the entry of FINRA’s findings.

“Protection of senior investors is a core mission for FINRA,” says Brad Bennett, executive vice president and chief of enforcement at FINRA, in a statement. “This case is a reminder to firms to ensure their supervisory systems and procedures are designed to protect senior investors from harm and to adequately follow-up on red flags to detect potential fraudulent account activity.”