The National Association of Securities Dealers today announced that it has fined two Fidelity broker-dealers US$400,000 for preparing and distributing misleading sales literature promoting their systematic investment plans, which were sold primarily to U.S. military personnel.

Issuance and sales of new systematic investment plans (also known as periodic payment plans), which typically require investors to make a fixed number of monthly payments over a 10- to 15-year period, were prohibited by Congress last fall, the NSAD noted. Previously sold plans remain in force.

As part of the settlement, for the next five years, the two broker-dealers – Fidelity Investments Institutional Services Company Inc. and Fidelity Distributors Corp. are required to notify holders of Fidelity’s Destiny I and II Systematic Investment Plans who want to increase their investments in existing plans that additional shares of the underlying fund can be purchased outside the Destiny Plans without paying the additional creation and sales charges of up to 50% on the first year’s payments.

The NASD found that between January 2003 and January 2006, the two broker-dealers violated NASD advertising rules by preparing and distributing various pieces of misleading sales literature. The US$400,000 fine will be paid to the NASD Investor Education Foundation (a tax-exempt, non-profit organization) to help fund its Military Financial Education Campaign, launched in February 2006. The foundation will use the funds to support educational programs, materials and research to equip members of the U.S. military and their families with the knowledge and skills necessary to make informed financial decisions.

Fidelity Investments Institutional Services and Fidelity Distributors Corp. settled the action without admitting or denying the charges, but consented to the entry of NASD’s findings.

“NASD’s advertising rules are designed to protect investors by prohibiting misleading sales literature and other misleading communications,” said James Shorris, NASD executive vice president and head of enforcement. “In this case, the Fidelity Destiny Plans were sold using various performance charts and data that presented a misleading picture of the plans’ performance. These failures were aggravated by the fact that the plans were sold primarily to military personnel, who often have limited time to study the marketing materials for investment products. And these particular products involve complex or unique features that may not be fully understood by the customers to whom they are offered or by the brokers who recommend them.”