Fidelity Fined $600K for Employee Stock Plan Account Theft

Fidelity Brokerage Services LLC has been fined $600,000 by the Financial Industry Regulatory Authority (FINRA) for supervisory failures tied to a serious case of financial misconduct. The penalty stems from Fidelity’s failure to detect and prevent the illegal conversion of approximately $750,000 from client accounts—an incident that exposed gaps in the firm’s internal controls and oversight systems.

If you or someone you know has suffered significant investment losses working with Fidelity or another brokerage firm, don’t hesitate to reach out to Meyer Wilson today. Our attorneys are experienced in securities fraud cases and will help to guide you through the process with a free consultation to determine whether your losses are the result of actionable misconduct.

What Happened: Fidelity Employee Stole $750,000 from Client Accounts

From December 2012 to October 2020, a Fidelity Brokerage Services LLC (CRD#: 7784) employee was able to manipulate client account information and steal funds from at least 37 individual investors without triggering any alerts or intervention. The internal systems and procedures meant to prevent this type of abuse simply weren’t functioning as they should have.

Here’s what went wrong:

• The employee altered client account information to redirect contact details—such as mailing addresses and email addresses—to himself.
• He issued unauthorized checks and wire transfers, transferring client funds without consent or detection. He did this by changing the name on the client’s plan to his own.
• No effective fraud alerts or approvals were required before large transactions were processed.
• Fidelity’s supervisory systems failed to flag or investigate unusual patterns, allowing the misconduct to continue for nearly eight years.

This case is a display of the danger of inadequate oversight and the serious financial harm that can occur when financial institutions fail to protect their clients’ assets.

How Fidelity Responded: Internal Investigation and Client Reimbursement

The fraud came to light after a client noticed an unauthorized transfer and reported it. Fidelity launched an internal investigation, notified FINRA, and began assessing the full extent of the theft. In response to the findings:

• Fidelity reimbursed all 37 affected clients, returning the stolen funds.
• Terminated the employee responsible for the damage caused.
• New safeguards and control measures were reportedly implemented to prevent future misconduct.

While restitution is an important step, it does not undo the potential emotional stress and lost confidence that comes with discovering that a trusted institution failed to protect your investments.

Meyer Wilson Helps Fidelity Investors Recover Losses

Fidelity’s $600,000 fine is a warning to all investors: even large, well-known firms can fall short in protecting their clients when internal controls and supervisory systems fail. These failures put your financial future at risk—especially when they go undetected for years.

Protecting investors requires:

• Systems that limit employee access to only the information they need to do their job
• Automated alerts and multi-step approval processes for high-risk transactions
• Regular audits and compliance reviews to catch signs of fraud early

Unfortunately, when these safeguards break down, it’s the investor—not the firm—who suffers the most. If your financial advisor or brokerage firm failed to protect your investments, it’s not your responsibility to have caught the fraud—it’s theirs.

If you or someone you know has been a victim of losses through Fidelity Brokerage Services, contact our team at Meyer Wilson today. With over 20 years of experience and $350 million in recovered losses for our clients, we are well-versed in handling cases such as these.

Frequently Asked Questions

What is financial misconduct?

Financial misconduct includes unauthorized transfers, embezzlement, misuse of client funds, and other illegal or unethical financial activities. These actions often occur when proper oversight is missing or ignored.

How is an internal investigation conducted?

Firms typically initiate internal investigations when misconduct is suspected. This involves reviewing records, interviewing employees, and coordinating with regulators. The goal is to identify wrongdoing and assess the impact on clients.

What is fraud detection in finance?

Fraud detection uses technology and data analysis to spot irregular patterns or transactions. Many firms now use AI-driven systems to identify suspicious activity in real-time, helping prevent financial harm.

What is a workflow management tool?

These tools automate financial processes, requiring approvals, tracking tasks, and reducing human error. They help ensure financial firms stay compliant while increasing operational efficiency.