Fidelity Brokerage Services has agreed to pay $600,000 to settle allegations of inadequate supervision related to business clients' equity-compensation plan accounts. According to the Financial Industry Regulatory Authority (Finra), the lapse enabled a former Fidelity associate to misappropriate $758,000 from 37 business clients over an eight-year period.
The associate was responsible for maintaining data within Stock Plan Services (SPS) accounts linked to the affected equity-compensation plans. Finra disclosed these details in a settlement letter dated January 8. Fidelity has since reimbursed clients for the stolen funds and implemented measures to monitor all outgoing transactions from international SPS accounts, according to Finra’s findings.
Fidelity resolved the allegations without admitting or denying wrongdoing. In a statement, the company emphasized its commitment to integrity: “In 2020, Fidelity discovered an associate’s misconduct, promptly notified and reimbursed impacted plan participants, reported the matter to Finra and law enforcement, and fully cooperated with Finra’s investigation. As acknowledged by Finra, we also have made enhancements to our supervisory system related to stock plan services.”
The fraudulent activities occurred between December 2012 and October 2020, during which Finra contends Fidelity's supervisory systems failed to adequately restrict access to SPS accounts and prevent unauthorized money transfers. Fidelity identified the misconduct and reported it to Finra, initiating an investigation into the associate’s actions.
The associate, barred from the securities industry in May 2021, was later criminally prosecuted. While Finra’s letter did not name the individual, the case details align with a former broker named William Eric Kursim. Fidelity terminated Kursim in October 2020 for allegedly “misusing access credentials to transfer funds from customer-related accounts to accounts he controlled,” as recorded in Finra's BrokerCheck database.
Kursim was suspended by Finra in February 2021 and automatically barred three months later after failing to appeal his suspension. In December 2023, Kursim made online statements admitting to crimes committed during his tenure at Fidelity. Two days later, he was sentenced to 27 months in prison, according to federal court records. He is currently incarcerated at a low-security federal prison in Ashland, Kentucky, with an expected release date in October.
Court records reveal that Kursim pleaded guilty in July 2023, but the specific charges remain sealed. Efforts to contact him or his legal representatives for comment were unsuccessful.
Finra’s settlement letter sheds light on the methods used by the former associate. It states that the individual manipulated account data in the 37 SPS accounts, replacing plan participants’ names with his own or linking them to a domestic SPS account under his control. Fidelity's internal systems reportedly failed to detect these unauthorized changes.
Using this altered data, the associate impersonated plan participants through Fidelity’s online SPS portal to liquidate their holdings. He then withdrew funds via unauthorized checks or wire transfers to domestic SPS accounts he controlled. According to Finra, these actions included issuing 83 checks totaling $380,000 and conducting 183 wire transfers amounting to $378,000.
Fidelity’s failure to establish robust controls over SPS accounts during this period underscores the importance of effective supervisory systems in safeguarding client assets. While the company has since strengthened its oversight, the case highlights vulnerabilities that wealth advisors and registered investment advisors (RIAs) should address to protect clients and maintain trust in their fiduciary duties.
