Late on Friday of last week Fidelity Investments announced that it has received a wells notice from the SEC, indicating that the agency will potentially persue a civil action against the mutual fund manager. Fidelity has been under SEC review since November of 2004

Via the International Herald Tribune:

SEC weighs civil action on Fidelity

By Riva D. Atlas
The New York Times
JULY 27, 2005

NEW YORK Fidelity Investments, the giant mutual fund company, has said that federal regulators are considering taking civil action against it as part of an inquiry over whether its employees improperly accepted gifts or entertainment from brokers.

Fidelity, which manages more than $1 trillion, said Monday that it had received a Wells notice from the Boston office of the Securities and Exchange Commission, meaning that the agency's staff is preparing to recommend action against the company and is giving Fidelity a chance to refute any accusations.

The notice was received late Friday by the entities that manage Fidelity's stock funds, a spokeswoman said. No current employees of Fidelity have received Wells notices, she said.

"The company has been cooperating with the Securities and Exchange Commission and all other inquiries concerning gifts and gratuities," Fidelity said in a statement. "We intend, however, to vigorously defend ourselves against any allegations that we believe are not supported by relevant facts and data."

Fidelity said that an internal review had "uncovered instances where there were violations of the company's policies and procedures" but that it had taken steps to correct the behavior. The firm has said that no mutual fund investors were harmed by the inappropriate behavior.

Since the investigation was disclosed last year, Fidelity has disciplined 16 traders, and five executives have left the company. Two weeks ago, it reassigned its stock trading chief, Scott DeSano, to another position within the company.

The investigation began after improprieties were discovered in a routine examination by the NASD, the nongovernmental regulatory body formerly known as the National Association of Securities Dealers. The NASD sent letters to more than two dozen brokerage firms seeking information about their gift and entertainment policies to see whether the brokers acted improperly in an effort to curry favor and to win commissions from fund companies.

The U.S. Attorney's Office in Boston has begun its own investigation of whether brokers improperly offered gifts and entertainment to Fidelity employees in an effort to attract trading business from the investment firm.

A representative of the SEC declined to comment on its investigation of Fidelity.

Original article appears here.

-- MDT