Thursday, March 06, 2008

Sex, Drugs and Ticker Tape - In(Fidelity)!



* A trader at Fidelity used a broker to buy 8 million shares in Tyco International days before the broker flew him on a private jet to the Super Bowl in Houston in 2002. The trades cost the Fidelity funds as much as $18 million.

* A former Fidelity trader received ecstasy pills and marijuana from brokers on " a number of occasions,' and had his bachelor's party in Miami funded by brokers. The three-day party cost brokers $160,000.

* Another former Fidelity trader took 24 trips in which brokers covered most expenses, including two first-class flights on the supersonic Concorde airliner.


The US Securities and Exchange Commision (SEC) has nailed Fidelity Investments for accepting gifts worth over $1.6 million from brokers angling for business.

The case indicted, among others, vice chairman Peter Lynch for accepting tickets for concerts, theater and a Ryder Cup golf tournament, while head trader Scott DeSano was hauled up for turning a blind eye to his traders' misdeeds.

The 3-year old case was settled for $8 million has seriously dented Fidelity's image which promotes itself as a company that protects the interest of its fund investors . Instead, it now appears that the tentacles of brokers have penetrated even this hallowed precinct.

SEC said that Fidelity's traders were shipped out in private jets to holiday locations that included Mexico, Bermuda and Las Vegas (USA), where they were entertained with female escorts, - basically means sexual activities - supplied with Ecstasy pills - an illegal drug that heightens feelings of euphoria and love.

Lynch, 64, the former manager of the flagship Fidelity Magellan fund, admitted to have received free tickets to concerts, theater and sporting events from Fidelity's traders, according to the SEC. He agreed to forfeit more than $20,000, representing the value of the gifts, plus interest.

Lynch, however said in a statement yesterday that he had asked the trading desk for "help locating tickets.'' Events included performances of " Nutcracker'' and the " Lion King.'' He also got 14 three-day passes to the Ryder Cup golf tournament at the Brookline Country Club in suburban Boston, where he had once been a caddy.

"I never intended to do anything inappropriate, and I regret having made those requests,'' Lynch said. He never worked on the trading desk and hasn't placed trades on behalf of Fidelity for 17 years, he said.

Fidelity has over $1.6 trillion as funds under management and serves 24 million customers.

Read the original SEC press release here

Read the Bloomberg story here

Read about Peter Lynch here

Posted by Eclectic Investor at 3:25 PM  

1 Comment:

Rajeev mundra said...

hi
Attack on big public institutions & famous hero figures is a common happening when bull markets are close to tops. Such attacks show the deteriorating public mood and usually if this is not one of incident, the dow has much more down to go and such happenings will show up in many more areas.
Regards
Rajeev

10:17 AM  

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KM

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