Fidelity Tier 3 Investments Investigation and Claims

Shepherd Smith Edwards and Kantas (investorlawyers.com) is representing Fidelity Brokerage Services (Fidelity) customers whose Fidelity advisor may have unsuitably recommended a Fidelity Tier 3 investment to them. Our investigation into these allegations recently accelerated following a wrongful termination lawsuit from ex-Fidelity financial advisor Michael Maeker. Mr. Maeker contends that he was fired for reporting that between 2019 and 2023, Fidelity committed best interest violations (Regulation BI) and breached its fiduciary duty when it allegedly sold its Tier 3 financial products to investors even when this was an unsuitable recommendation.

Not only that, but also according to Mr. Maeker, Fidelity “incentivized” its financial advisors with offers of higher compensation for placing customers’ assets in these Tier 3 investments. Inversely, the broker-dealer allegedly threatened career ramifications to those Fidelity advisors that did not comply. Fidelity denies the claims made by this whistleblower.

This category of products generate the highest revenues for Fidelity. In fact, Tier 3 products purportedly paid 10 times the amount of commissions that could be earned from Tier 1 investments. According to Mr. Maeker’s whistleblower lawsuit, a significant portion of branch managers' compensation depended on how much of investors’ assets were placed into these Tier 3 investments. The managers, in turn, allegedly pressured the Fidelity advisors they were supposed to be supervising.

In an email to ThinkAdvisor, Mr. Maeker’s attorney categorized the products in the different tiers as the following:

Fidelity Tier 1 assets: Treasuries and CDs

Fidelity Tier 2 assets: Mutual funds and exchange-traded funds (ETFs)

Fidelity Tier 3 assets: Equities, alternatives, and options

Recently, Shepherd Smith Edwards and Kantas filed a broker fraud lawsuit against Fidelity on behalf of two Texas claimants who are seeking up to $500,000 in damages. These Fidelity customers sustained losses in a managed options program that involved the firm employing a “covered” call strategy on a concentrated position, which led to significant losses in mere weeks. Although a “covered call” strategy is often discussed as being conservative, that is not true if the investor has no interest in selling the underlying security to “cover” the call. Instead, when the investor had no interest in selling the underlying security, this strategy is much more like a “naked” options strategy, which is one of the most aggressive types of investing approaches around and was purportedly misrepresented to the investors as a a safe strategy the would generate additional income for the customer. For these customers and others our firm has met with, SpiderRock Advisors and Advisors Capital Management, two registered investment advisory firms (RIA), were involved in the process.

Cornerstone Wealth Management is another RIA named by other Fidelity customers we are talking to at this time about similar claims of losses. Fidelity has come under fire over its Wealth Advisor Solutions (WAS) product, which it purportedly uses to recommend third-party independent advisory firms and earn referral fees at the same time.

If you suspect your investment losses in a Fidelity Tier 3 asset were because of an unsuitable recommendation that violated your best interests, we can help you and offer a free, no obligation case consultation to determine whether you have grounds for pursuing damages against Fidelity or any of the other investment advisory firms involved. Should we agree to work together, our broker misconduct attorneys would conduct a thorough investigation into the cause of your losses and whether unsuitability, Reg BI violations, misrepresentations and omissions, overconcentration, or negligence was involved.

Financial advisors and their broker-dealers are only supposed to market and sell a product to you if it is in your best interests and appropriate given your age, financial goals, risk tolerance level, net worth, the makeup of your portfolio, and other key facts about you as an investor. Unfortunately, even the most well-known brokerage firms have been found to prioritize commissions over properly managing their clients’ assets. This can lead to significant losses to unsuspecting customers.

Pursuing damages against a big firm like Fidelity is not something you want to do without seasoned broker fraud lawyers fighting for you. Our securities law firm has been exclusively working with investors against broker-dealers and investment advisors for over 30 years. We have represented these clients in over 1000 matters, including the most complex kinds of claimed losses and in every possible forum for recovery, such as in arbitration, mediation, and litigation.

When you work with us, you aren’t just hiring one of our broker misconduct attorneys, you are retaining everyone at our firm to provide you with over a century’s worth of combined experience in securities law and the securities industry. More than 90% of our clients have received full or partial financial recovery.

Because we often work on a contingency basis, you will only pay for our legal services if we secure an award or settlement for you. Those fees will come from what the broker-dealer pays you and not out of your own pocket.

Call (800) 259-9010 or fill out this form.