FINRA’s Department of Enforcement investigated Fidelity’s business activities and alleged it failed to establish and maintain an adequate system to monitor, supervise, and control to achieve compliance with applicable securities laws and detect the unlawful and fraudulent transfers. Ms. Lewis’ fraudulent scheme, in essence, worked as follows. Lewis contacted former customers and told them that she worked at Fidelity, and as a result, was able to obtain her victims’ personal information and used that information to open and control individual accounts in their names at Fidelity. Lewis also created joint accounts with each customer with whom she and the customer were listed as co-owners without the customers’ knowledge or consent. Lewis then transferred funds from the customers’ individual accounts into her joint account, and then initiated electronic transfers to another account that Lewis solely owned.
FINRA alleged Fidelity failed to detect or adequately follow up on multiple red flags related to Lewis’ scheme. Specifically, Fidelity failed to detect that although Lewis’ victims were unrelated, all of the individual and joint accounts established in their names shared one or more elements of common customer information associated with Lewis, such as a common email address, common physical address, or common phone number. Additionally, FINRA asserted the money movements in the accounts contained a consistent pattern of transfers from the customers’ individual accounts to the joint accounts. As a result, FINRA alleged that Fidelity failed to detect and respond to “red flags”, and as a consequence, contributed to Lewis’ fraudulent activities.
Based upon the foregoing conduct, FINRA alleged Fidelity violated several financial industry rules and regulations, including but not limited to, NASD Conduct Rules 3010(a) and 3012(a)(2)(B)(i), as well as FINRA Rules 2010. NASD Rule 3010(a) requires each member to establish and maintain a system of supervision that is reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable NASD and FINRA Rules. Here, FINRA alleged Fidelity did not establish and maintain an adequate system to monitor, supervise, and control to achieve compliance with applicable securities laws and detect the unlawful and fraudulent transfers.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you suffered investment damages investing with Lewis through Fidelity, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.