David K. Donovan, Jr., one of Fidelity Investment's star traders who left the company last week, said on Thursday that regulators had begun investigating whether trading in his mother's account involved preferential treatment, according to the Boston Globe.
Donovan said his mother's single trade "had nothing to do with me." In particular, investigators are looking at the trading account of Concetta Donovan in shares of Covad Communications Group, a provider of high-speed telecommunications services.
Lately, regulators have been trying to determine if traders at Fidelity steered business to brokers who showered them with lavish gifts and entertainment, as opposed to seeking the best deal for clients. With Donovan's mother's account in the limelight, securities attorneys said investigators would be trying to figure out if an employee or a third party such as a relative profited from insider information.
Donovan called his mother's trade an "innocent" transaction from which he "didn't profit," according to the Globe. "There is no issue. I didn't have anything to do with it," he added. Donovan's transactions with his brother, Peter Donovan, who worked for Banc of America Securities, have also come under the microscope.
Fidelity refused to comment on Donovan, citing employee confidentiality issues. Fidelity has lost five traders, including Donovan, since the Securities and Exchange Commission began looking into the company's gift-giving practices. Last December, Fidelity said that it disciplined 14 employees for violating gifts and gratuities policies.