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Rating:Was Fidelity Bamboozled? Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, October 27, 2005

Was Fidelity Bamboozled?

by: Theresa Sim

By now, everyone's heard most of the details of the "greens-for-green" probe going on at Fidelity, including the entertainment dwarves, lavish golf and gambling outings, private jets and yacht parties.

But a New York Post article puts a different spin on the entire episode. The new information -- from unnamed sources at the SEC and elsewhere -- may exculpate Fidelity, at least partially.

According to the Post, it may be that the bad behavior was largely from Fidelity's traders, and not some sort of company policy. The Post reports the SEC is looking into whether Fidelity's traders forced traders at brokerage firms to revise trades to improve their Volume Weighted Average Price, or place certain trades in "error accounts."

The unnamed SEC source tells the Post: "there's some indication of impropriety in error accounts [it's] certainly worth our time looking at it."

An anonymous tipster lays out the scheme like so: Fidelity's traders and traders at broker-dealers were working in concert to improve VWAP scores or put certain trades in error accounts, but higher-ups at both firms were unaware of the practices.

Fidelity traders would look good because of the VWAP scores, and the brokerage's traders would look good because of continued trading flow from Fidelity. But the brokerage firm would be eating the costs of the trades.  

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