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Fidelity Hit With $1 Million Fine for Failing to Detect Fraud Against Seniors

By Erwin J.Shutak, Esq.  of Shustak Reynolds & Partners, P.C. posted on Thursday, December 24, 2015.

This week FINRA hit the retail brokerage arm of Fidelity Investments with a $1 million fine and sanction for failing to detect and protect is clients, mostly seniors, from a fraud perpetuated by a woman who posed as a Fidelity broker for 8 years. From 2006 to 2013 Lisa A. Lewis posed as a Fidelity broker. She used personal information from a number of mostly elderly customers if her former firm to open accounts in their names at Fidelity and have all correspondence and communications sent to her, not the clients.

Ms. Lewis then stole more than $1 million from the customers, according to FINRA. In June 2014, Ms. Lewis pleaded guilty to wire fraud and is now serving a jail sentence.

The Financial Industry Regulatory Authority Inc. found that Fidelity failed to detect Ms. Lewis' fraud due to lax supervisory controls. FINRA then fined Fidelity Brokerage Services $500,000 and ordered the firm to pay $530,000 in restitution. The firm neither admitted nor denied the charges.

FINRA  Fidelity failed to react to “red flags” regarding the accounts Ms. Lewis set up, such as the fact that the unrelated accounts shared common email or postal addresses or phone numbers with Ms. Lewis. The firm also missed unusual money movements in the accounts.

Shustak Reynolds & Partners, P.C. has extensive experience in the area of securities and financial services law and routinely counsels investors, brokers, broker-dealers and registered investment advisors. For more information  contact Erwin J. Shustak, Esq, Managing Partner, at 619.696.9500 or via email at [email protected] or visit our web site at www.shufirm.com

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