Fidelity Faces Lawsuit over Revenue-Sharing

The latest lawsuit focuses on Fidelity’s treatment of revenue sharing payments, arguing “Defendants caused the Plan to forego tens of millions of dollars in revenue-sharing rebates that Fidelity kept for itself.” According to the complaint, in 2012, the Fidelity plan had approximately 71% of its investment assets in actively-managed Fidelity mutual funds. All the funds are managed by an affiliate of the recordkeeper. Instead of negotiating a revenue-sharing recapture arrangement favorable towards participants, plan fiduciaries arranged with Fidelity Operations and Fidelity Management to keep all revenue-sharing for Fidelity, the complaint contends, saying this arrangement cost the Fidelity Plan and its participants approximately $15 million a year for the years 2008-2013.

The class action is brought on behalf of participants in the plan from January 8, 2008 through the present, and accuses FMR, LLC and its retirement plan committee of violating their duties under the Employee Retirement Income Security Act (ERISA) to act solely in the interests of the plan and its participants. ERISA also demands that plan fiduciaries defray the expenses of plan administration and be prudent with plan assets.

The suit seeks an order compelling the disgorgement of all revenue-sharing payments that it says should have been rebated to the plan and instead were received, directly or indirectly, by FMR subsidiaries and affiliates, and an order compelling the defendants to restore all losses to the plan arising from their alleged violations of ERISA, plus opportunity losses to compensate for the plan’s lack of access to the monies during the class period.

A previous lawsuit filed against Fidelity accuses it of self-dealing at the expense of its own workers’ retirement savings. The complaint brought by an FMR LLC Profit Sharing Plan participant on behalf of all participants says the history of the plan’s investment offerings demonstrates rampant conflicts of interest (see “Fidelity Accused of Self-Dealing in New Lawsuit”).

The complaint filed in the new case, Yeaw v. FMR, LLC, is here.