SEC Warns Ex-Trader at Fidelity

Scott DeSano, former chief of stock trading at Fidelity Investments, was told by the Securities and Exchange Commission that he might be sued as part of its probe into gift giving by brokers seeking business from Fidelity, a person familiar with the case said Friday.

The SEC sent DeSano, 44, a so-called Wells notice, signaling that its staff might recommend a lawsuit and allowing him to dispute the allegations, said the person, who spoke on condition he not be named. The action was first reported Friday by the Wall Street Journal.

“We’ll have to see if it was simply a lapse in judgment or something more serious,” Eric Kobren, editor of Fidelity Insight, an industry newsletter in Wellesley Hills, Mass., said of DeSano.

The SEC is investigating whether brokers tried to win orders from Fidelity to buy and sell stock by plying its traders with golf outings, expensive wine and trips to the Super Bowl, Wimbledon and a Miami bachelor party. The NASD and the U.S. attorney’s office in Boston also are investigating.

Boston-based Fidelity, which manages $1.1 trillion and is one of Wall Street’s biggest trading customers, said July 25 that it received a Wells notice.

The investigation marks a rare blemish on Fidelity’s image. The firm hasn’t been tainted by the broader fund industry scandal involving deals under which favored clients engaged in market-timing and other abusive trading strategies.

DeSano’s lawyer, Jeffrey Rudman, didn’t return a call. Fidelity spokeswoman Anne Crowley said company policy prohibited her from commenting about an employee. A spokesman for the SEC declined to comment.

DeSano was reassigned last month to Fidelity’s strategic new business development group.