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Commentary

Fidelity Fined For Favouring Brokers

Bloomberg says Fidelity has been fined $1.6 million for taking favours from brokers in response for running transactions through them. The favours involved providing traders with female escorts and drugs, to flights in chartered jets and tickets to sports events.

Even Peter Lynch was charged – in a small way, for asking of favours like tickets and such.

I have no idea if something like this happens in India. Typical funds run money through their own brokerages, fairly openly, and there seem to be no strict rules. Or are there?

  • Anonymous says:

    >I am a reasonably big investor in Mutual Funds thro’ broker. The Manager of Broker comes to my house to service my investments. On several occasions he has done in front of me things which one can say is illegal.

    1. Directly calling the Fund House Manager and telling them to accept transaction slips after cut off time or dates (IPOs).

    2. Asking them to provide for weekend getaway.

    3. He was boasting that sometimes he gets tips about shares to purchase from Fund Houses. He used to say that many of the Fund House Dealing staff operate thro’ their close family members to buy shares which Fund has identified… etc.

    4. The standards are as dirty as Indian Cities on the Forbes list of Dirtiest.

    5. This is only at ground level, I won’t be surprised if the Fund Houses feed Bureaucrats, SEBI or even the Politicians including FM.

  • Anonymous says:

    >I can vouch on #1’s comment. It’s VERY dirty and not surprising. Take what Fidelity did and multiply it by 10x.

    Although #1, forgot to mention some of those weekend getaways also entail females, if you know what i mean.

  • Anonymous says:

    >Normally most fund houses have an approved panel of brokers through whom it can trade. Then it is the dealers and the fund managers who decide who gets which orders. Consequently, these brokers lubricate the fund house adequately by way of gifts and sundry other favours. I used to work in a reasonably big fund house way back in 1996. Tickets for the India Australia world cup (guest stand) costing at that time Rs. 3,500 per ticket were being distributed rather too freely. I remember one dealer had got around 20 of his family members for the match and none of the tickets were actually purchased. As there are no free meals, one can only imagine what the pound of flesh could be. Typical examples would be palming off a block of shares of a dubious company, buying at the higher end of the price spectrum, getting into unlisted shares up to the SEBI allowable limit etc. are only the tip of the iceberg.