After registered financial advisor Michael Maeker raised concerns that his employer, Fidelity Investments, was running afoul of securities laws by pressuring advisors to eschew fiduciary responsibilities and instead invest clients’ money to benefit the company’s bottom line, he was fired.
Maeker alleges in a lawsuit filed in federal court in Dallas Monday that recorded conversations with his branch manager and other Fidelity executives verify his claims that financial advisors were routinely pressured to act not in the best interest of their clients but of the company.
“Maeker formally blew the whistle and reported this unlawful practice to various individuals at Fidelity through multiple channels,” the suit alleges. “Rather than disciplining the executives and managers who violated Reg BI (and other securities laws and regulations), Fidelity retaliated against and terminated Maeker’s employment to send a message to its FAs to keep quiet. After Maeker filed his [Sarbanes-Oxley] complaint, Fidelity belatedly stopped violating Reg. BI. 9. Fidelity’s illegal retaliation against, and wrongful termination of, Maeker caused him millions in damages, emotional distress, and reputational harm.”
After 26 years working as a financial advisor with a “spotless” record, Fidelity’s termination of Maeker made it “extremely difficult” to find employment in the industry.
He ended up taking a job in the Home Depot paint department to support his family.
Fidelity issued a statement to The Texas Lawbook denying the allegations and vowing to vigorously defend itself against Maeker’s claims.
“Mr. Maeker’s complaint was already reviewed and dismissed by an OSHA investigator who concluded, among other things, that Mr. Maeker would have been removed from his role due to his misconduct regardless of his purported whistleblowing activity,” the statement reads. “In other words, Fidelity did not retaliate against him.”
According to the lawsuit, an investigator in the U.S. Department of Labor initially dismissed the complaint Maeker filed in October 2022. In September 2023 Maeker appealed that finding and a final decision hadn’t been issued by the time the lawsuit was filed.
Rogge Dunn of Rogge Dunn Group, who represents Maeker, told The Lawbook on Wednesday that his client wasn’t the only Fidelity financial advisor who was pressured to violate securities laws.
“I expect other financial advisors to come forward and blow the whistle on Fidelity,” he said. “It took courage for Maeker to speak out and he has paid the ultimate price for doing the right thing.”
Fidelity offers its clients three tiers of financial investment products, according to the complaint, referred to as Tier 1, Tier 2 and Tier 3. Tier 1 investments generate the lowest revenues for Fidelity, Tier 2 generates the second highest revenues for Fidelity and Tier 3 products generate the highest revenues for the company.
“Fidelity pressured its branch managers to pressure Fidelity’s financial advisors to persuade investors to place their assets into Tier 3 investments that generated higher revenues for Fidelity,” the suit alleges. “A significant portion of Fidelity’s branch managers’ compensation was based on how much investors’ assets were placed into financial products that generated higher revenues for Fidelity. Further, Fidelity circulated charts ranking the branch managers in a region based on the amount of investors’ assets in Tier 3.”
Those branch managers would then pressure financial advisors to steer investments into Tier 3, Maeker told the court. The lawsuit alleges that Fidelity’s Dallas branch manager, John Schiavone — who is not a defendant in the lawsuit — had “continuously pressured Maeker to push clients into unsuitable or ill-advised, high fee generating financial investments that would make Fidelity more money — regardless of investors’ best interest.”
The lawsuit also serves as a transcript for the conversations Maeker alleges he recorded that support claims. In one, Shiavone chastises Maeker for having directed only $2.5 million of client assets into Tier 3 and said he “would’ve thrown [Maeker] out.”
MR. MAEKER: “How — how would you throw me out?”
MR. SCHIAVONE: “I don’t know. I — I would figure out a way to. I don’t how that was ever allowed.”
Maeker detailed what he called a “carrot and stick approach” that was used to incentivize financial advisors to push the Tier 3 products. For starters, financial advisors were paid 10 times the commissions they received for placing assets in Tier 3 compared to Tier 1.
“Second, this economic incentive also included awarding FAs Fidelity stock, if they put up big Tier 3 numbers,” according to the suit. “The sticks included never ending direct and indirect pressure that an FA was hurting her/his career at Fidelity would suffer and could be fired if they did not get ‘on board’ with pushing clients into Tier 3.”
Maeker alleges he told numerous people at Fidelity that he believed Schiavone was engaging in illegal conduct but nothing was done.
One Dec. 16, 2022, he was fired, purportedly for violating a written policy.
The case has been assigned to U.S. District Judge Ada Brown.
Maeker is also represented by Alec E. Pedigo of Rogge Dunn Group.
Fidelity’s counsel had not filed an appearance as of Wednesday.
The case number is 3:24-cv-01078.