Fidelity brokerage allowed “rubber stamps” to abuse meme stock, regulator tells Reuters

By Jonathan Stempel

(Reuters) – Massachusetts Securities Regulators on Wednesday accused Fidelity Brokerage Services of properly accusing it of “rubber stamp” requirements for trading options, saying “unethical” practices allowed some ineligible retail investors to trade in meme shares.

Secretary of State William Galvin said Fidelity, which handled $ 30.9 billion in retail brokerage accounts and $ 11.1 trillion in assets as of Sept. 30, had betrayed its “middle and non-attitude” by examining options for negotiating investor protection options and margins.

The administrative complaint against Fidelity came at a time when regulators were trying to understand the dangers of ordinary investors in trading options and other complex products, as mobile phone applications make it easier to dive into the stock markets.

Fidelity has said it has fully cooperated with Galvin’s office, but disagrees with the company’s characteristics.

“We have effective due diligence processes in place, and we look forward to addressing and resolving this issue through the administrative process,” Fidelity said in a statement.

Galvin said Fidelity’s system allows investors to send a wide range of trading orders with ever-growing claims, and does not detect false claims about employment status, investing experience and financial wealth.

An investor said he submitted 11 applications a week, including a sudden change of job from “Scientist” to “CEO”, and after gaining approval, AMC Entertainment (NYSE :), BlackBerry (NYSE 🙂 and AMC Entertainment (NYSE :), including BlackBerry (NYSE 🙂 and the options he traded on meme shares. Nokia (NYSE :).

Given the popularity of mobile apps and options trading among young investors, “brokerage vendors need to make sure they still maintain the same level of care and attention and make sure they meet those investors,” Galvin said.

Massachusetts wants Fidelity to pay a civil fine, hire an independent compliance consultant, and prevent future violations.

Opportunities give investors the right to buy and sell shares but not the obligation. Margin trading allows investors to trade stocks with borrowed money. Both can lead to higher or lower returns, and a higher risk, than ordinary stock trading.

Last June, Robinhood approved https://www.reuters.com/technology/broker-robinhood-pay-70-mln-systemic-supervisory-failures-2021-06-30 $ 69.6 million in fines and refund payments to fix various issues https://www.finra.org/media-center/newsreleases/2021/finra-orders-record-financial-penalties-against-robinhood-financial Financial Industry Regulatory Authority claims to accept thousands of ineligible customers including. opportunities to negotiate. The company went public as https://www.reuters.com/business/finance/robinhood-set-rise-nasdaq-debut-2021-07-29 Robinhood markets Inc. (NASDAQ 🙂 months later.