trending Market Intelligence /marketintelligence/en/news-insights/trending/AjsS3ue4uFAN7lUmbGgI3g2 content esgSubNav
In This List

Court dismisses complaint against Fidelity over alleged pay-to-play scheme

Blog

Spotlight on sustainability: How banks can overcome the challenges of achieving net-zero emissions by 2050

Blog

Insight Weekly: US election scenarios; borrowing costs rise; commercial REIT fears

Podcast

Street Talk | Episode 100 - KBW CEO offers optimism for bears fearful of bank liquidity, credit

Blog

Insight Weekly: Stocks endure more pain; bank branch M&A slows; debt ratios fall


Court dismisses complaint against Fidelity over alleged pay-to-play scheme

A Massachusetts district court judge has dismissed a complaint that alleged that two Fidelity Investments units hired by a retirement plan failed to fulfill their fiduciary duty.

The complaint alleged that Fidelity Management Trust Co. and Fidelity Investments Institutional Operations Co. Inc. had an improper "pay to play" arrangement with Financial Engines Advisors LLC, which provided investment advice to participants in the retirement program, Delta Family-Care Savings Plan. The Fidelity units received at least half of Financial Engines Advisors' plan-related fees for being included as the plan's investment adviser, according to the complaint. Those fees were allegedly not related to services performed and inflated the cost of investment advice.

The plaintiffs also claimed that, when plan participants invested in mutual funds through a designated portal called Brokerage Link, Fidelity units bought shares with higher fees, typically including revenue-sharing payments made to parties who distribute the shares.

But the court ruled that the plaintiffs could not plausibly allege that Fidelity units were exercising fiduciary functions because Delta entities exercised control over Brokerage Link. Because Delta, not Fidelity units, had the authority to hire Financial Engines Advisors, Delta was free to terminate its relationship with Fidelity units and Financial Engines if there was an unfavorable fee-sharing agreement, the ruling stated.

Fidelity Investments is a registered trademark of FMR LLC.