FINRA Sanctions Fidelity Brokerage Services LLC $1 Million for Supervisory Failures

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Firm Failed to Follow Up on Red Flags to Detect or Prevent Theft of
Funds From Senior Investors by Fraudster Posing as Fidelity Broker

WASHINGTON–(BUSINESS WIRE)–The Financial Industry Regulatory Authority (FINRA) announced today that
it fined Fidelity Brokerage Services LLC $500,000 and ordered the firm
to pay nearly $530,000 in restitution for failing to detect or prevent
the theft of more than $1 million from nine of its customers, eight of
whom were senior citizens. Lisa Lewis posed as a Fidelity broker,
obtained her victims’ personal information, and systematically stole
customer assets through numerous transfers and debit-card transactions.

FINRA found that from August 2006 until her fraud was discovered in May
2013, Lewis was running a conversion scheme by targeting former
customers from another brokerage firm from which she had been fired.
Lewis told the victims she was a Fidelity broker and urged them to
establish accounts at the firm and also established joint accounts with
her victims in which she was listed as an owner. She eventually
established more than 50 accounts and converted assets from a number of
these accounts for her own personal benefit. In June 2014, Lewis pleaded
guilty to wire fraud, and was sentenced to 15 years in prison and was
ordered to pay more than $2 million in restitution to her victims.

FINRA found that Fidelity failed to detect or adequately follow up on
multiple “red flags” related to Lewis’s scheme. For example, though
Lewis’ victims were unrelated to one another, their various accounts
shared a number of common identifiers tying them all to Lewis, such as a
common email address, physical address or phone number. Fidelity also
failed to detect Lewis’ consistent pattern of money movements and
overlooked red flags in telephone calls handled by its customer-service
call center in which there were indications that Lewis was impersonating
or taking advantage of her senior investor victims.

Brad Bennett, FINRA’s Executive Vice President and Chief of Enforcement,
said, “Protection of senior investors is a core mission for FINRA and
why we started the FINRA Securities Helpline for Seniors. This case is a
reminder to firms to ensure their supervisory systems and procedures are
designed to protect senior investors from harm and to adequately
follow-up on red flags to detect potential fraudulent account activity.”

FINRA also found that Fidelity’s inadequate supervisory systems and
procedures contributed to the failure to detect and prevent Lewis’s
fraudulent activities. Though Fidelity maintained a report designed to
identify common email addresses shared across multiple accounts, it
failed to implement procedures regarding the report’s use and dedicate
adequate resources to the review and investigation of the reports. As a
result, there was a backlog in reviewing thousands of reports, including
a report in March 2012 showing that Lewis’ email address was associated
with dozens of otherwise unrelated accounts. The report was not reviewed
by anyone at Fidelity until April 2013, more than a year after it was
generated.

In settling this matter, Fidelity neither admitted nor denied the
charges, but consented to the entry of FINRA’s findings.

Investors can obtain more information about, and the disciplinary record
of, any FINRA-registered broker or brokerage firm by using FINRA’s
BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2014,
members of the public used this service to conduct 18.9 million reviews
of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck
or by calling (800) 289-9999. Investors may find copies of this
disciplinary action as well as other disciplinary documents in FINRA’s
Disciplinary Actions Online database
. Investors can also call FINRA’s
Securities Helpline for Seniors
at (844) 57-HELPS for
assistance or to raise concerns about issues they have with their
brokerage accounts and investments.

FINRA, the Financial Industry Regulatory Authority, is the largest
independent regulator for all securities firms doing business in the
United States. FINRA is dedicated to investor protection and market
integrity through effective and efficient regulation and complementary
compliance and technology-based services. FINRA touches virtually every
aspect of the securities business – from registering and educating all
industry participants to examining securities firms, writing rules,
enforcing those rules and the federal securities laws, and informing and
educating the investing public. In addition, FINRA provides surveillance
and other regulatory services for equities and options markets, as well
as trade reporting and other industry utilities. FINRA also administers
the largest dispute resolution forum for investors and firms. For more
information, please visit www.finra.org.

Contacts

Financial Industry Regulatory Authority (FINRA)
Michelle
Ong
, 202-728-8464