Fidelity Investments is facing a class-action suit which alleges it charged an illegal fee on certain products.
The suit was filed in the U.S. District Court for the District of Massachusetts on behalf of investors in retirement plans serviced by Fidelity.
The suit alleges that since at least 2016, Fidelity Investments has been charging an "infrastructure" fee to mutual funds and other investment companies, in exchange for their products to be featured on the Fidelity platform. Plaintiffs argued it is an illegal and undisclosed pay-to-play fee, which allegedly resulted in higher expenses for the company's retirement plan participants and lower returns on their investments.
Fidelity Investments allegedly charged each participating fund a rate equal to 0.15% of their industrywide assets. The plaintiffs also argued the company "fraudulently concealed" its receipt of the payments from the participating funds.
The company in recent months has been facing regulatory scrutiny over this fee, with the U.S. Labor Department and Massachusetts Secretary of the Commonwealth each conducting their own investigations on this matter.
Michael Aalto, a Fidelity Investments spokesman, told InvestmentNews the company denies all allegations raised in this suit and that the company is in full compliance with all the needed disclosure requirements on the fees it charges to customers.