Fidelity Fined $750,000 for Lax Approval of Options Traders
The Massachusetts Securities Division has fined Fidelity Brokerage Services $750,000 for “rubber-stamping” options trading applications.
The consent order, filed by Secretary of State William Galvin, alleged that Fidelity’s application review system “allowed customers to submit multiple applications, each time with the information altered until the customers met the requirements to be approved,” his office said.
On Jan. 26, 2022, Galvin’s division filed a complaint against Fidelity alleging that the firm “failed to properly vet customers who applied to be approved for options and margin trading,” his office said.
Fidelity has taken steps since then to improve its application review systems and online applications, according to Galvin’s office.
Options trading is risky due to options’ complexity, lack of liquidity and “the fact that just breaking even requires one to accurately predict short-term price fluctuations in the underlying asset,” Galvin said, saying Fidelity showed a “half-hearted and lackadaisical attitude” toward safeguarding retail investors.
