A group of former clients of a New London investment manager say Fidelity should cover some of their losses, accusing the brokerage firm of missing a series of red flags in his trading activity.
The investors allege that Thomas Chadwick, a longtime Upper Valley investment manager who controlled around $60 million in assets, steered his clients towards highly risky assets without their knowledge, ultimately costing them substantial portions of their savings. Chadwick is also accused of logging into his clients accounts using the Fidelity platform without their consent.
New Hampshire and Vermont securities regulators have already taken action against Chadwick, stripping him of his license and ordering him to pay around $6 million in fines and restitution.
Now, a group of Upper Valley residents are asking federal regulators to hold Fidelity accountable, as well.
If the company had “fulfilled all of its supervisory and regulatory duties as a licensed brokerage firm, claimants would not have suffered their devastating losses,” lawyers for the group allege in a filing with the Financial Industry Regulatory Authority.
Fidelity didn’t immediately respond to a request for comment.
According to legal filings, the company did alert state regulators in April 2022 that Chadwick was logging in to accounts and making trades even after his trading relationship with Fidelity was terminated.
Chadwick was previously accused of steering at least 99 clients into high risk real estate derivatives, while telling investors they were safe investments, ultimately losing more than $11 million in client money. He was also accused by the New Hampshire’s Bureau of Securities Regulation of using the usernames and passwords of 27 former clients to log into Fidelity brokerage accounts to make trades, triggering a lockdown of those accounts.
Chadwick was already under investigation by state authorities at the time for suspicious trading of a single and highly risky stock—REML—that authorities say racked up losses for clients.
Fidelity, which is based in Rhode Island, has approximately 850 branches across the country.
The new arbitration filing by victims of Chadwick allege the company should have had internal checks in place to spot his suspicious trading patterns well in advance of when the company finally took action.
“If Fidelity had appropriate supervisory systems in place, tailored to the actual activity taking place on their platform, Chadwick’s history would have raised serious “red flags,” which would have caused Fidelity to deny Chadwick and his firm access to their platform,” the investors allege.
Chadwick previously settled with the State of New Hampshire, agreeing to pay $4.9 million in restitution to his victims, and another $1 million in fines.
According to lawyers for the victims, he has not yet satisfied those payments.
Chadwick did not respond to a request for comment.
