Following settlements with the Financial Industry Regulatory Authority (FINRA), stock fraud lawyers say Charles Schwab and Fidelity investors could recover losses through securities arbitration. Fidelity reportedly has agreed to pay a $375,000 fine in a settlement with FINRA over allegations that the firm committed sales violations from December 2006 through December 2008 involving the Fidelity Ultra Short Bond Fund.
According to FINRA’s allegations, Fidelity Investments Institutional Services Co. Inc. and Fidelity Brokerage Services LLC, two Fidelity broker-dealers, failed to provide adequate supervisory procedures and produced misleading advertising and sales materials for the fund. Apparently when the subprime crisis unfolded, the fund began losing value in June 2007, but the sales materials for Fidelity continued to purport fixed-income securities of “high credit quality” being held by the fund. The fund’s net asset value fell to $8.25 per share by April 2008, from $10 per share before June 2007, according to investment fraud lawyers.
In a separate ruling in May, a settlement was approved by a federal court in a class action filed against Fidelity units in 2008. In that settlement, Fidelity paid $7.5 million to investors of the bond fund. The Charles Schwab Corp. settled a similar case last year in which they paid almost $119 million over its YieldPlus bond fund. A separate class action claim saw Schwab pay another $235 million to investors in 2010. However, stock fraud lawyers believe that not all investors were compensated.