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Fidelity Faces State Inquiry Over Fees Charged for 401(k) Plans

The Massachusetts Secretary of the Commonwealth's securities division is requesting information about Fidelity's mutual fund fees.

By Michael McDonald

(Bloomberg) --Fidelity Investments is facing more scrutiny over fees it charges some mutual funds for using its platform to access retirement plan customers.

The Massachusetts Secretary of the Commonwealth said its securities division sent a letter on Feb. 27 to Boston-based Fidelity requesting information about those fees. The inquiry follows a Feb. 21 lawsuit against Fidelity by an investor in T-Mobile USA Inc.’s 401(k) plan that claims the firm conceals so-called infrastructure fees.

The fees are also being probed by the U.S. Labor Department, the Wall Street Journal reported last week. A spokesman for the Department of Labor said the agency declined to comment on that report.

The secretary of the commonwealth’s office declined to provide a copy of the letter but said in an email to Bloomberg it has requested the following information:

  • Identity of all Massachusetts pension and retirement plans where Fidelity is a fiduciary or service provider
  • Details of all fees payable by funds to Fidelity
  • Description of the infrastructure fee payable by funds on the network
  • Identity of Fidelity units that receive the fee; whether the fee is disclosed to investors, and if so, how the disclosure is provided

Fidelity spokesman Vincent Loporchio said that the company doesn’t comment on communications with regulators. He said in a statement last week that the “infrastructure fee has been fully disclosed to 401(k) plans and their sponsors via a disclosure that Fidelity sent to over 20,000 401(k) plans.” Fidelity denies the lawsuit’s allegations and will vigorously defend itself, he said.

The state securities division is overseen by Secretary of the Commonwealth William Galvin, who has played a key role in policing the mutual fund and securities industries. In 2002, along with then-New York Attorney General Eliot Spitzer, his office was a linchpin in probing whether Wall Street firms misled investors with biased investment research. In an agreement with state, federal and industry groups several firms agreed to pay $1.4 billion to settle such claims. Fidelity wasn’t involved in that case.

Fidelity had $2.4 trillion in assets under management as of Dec. 31.


To contact the reporter on this story: Michael McDonald in Boston at [email protected] To contact the editors responsible for this story: Margaret Collins at [email protected] Mary Romano, Alan Mirabella
 

 

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