Story on Probe of Fidelity Execs Draws Unusual SEC Response

NEW YORK — The Securities and Exchange Commission, in an unusual public statement, took issue Friday with a front-page report in the Washington Post that said the agency was investigating trading at Fidelity Investments.

The report said Jeffrey Vinik, manager of Fidelity’s $56-billion Magellan Fund, and six other current and former Fidelity executives are being investigated to determine whether they bought shares of companies before Magellan bought the same stocks. The practice is known as “front-running.” The report, also published Friday in most editions of The Times, cited unnamed “government and legal sources.”

The SEC issued a statement saying that, “Unfortunately, the article contains inaccuracies which have led to erroneous impressions.” The agency declined to elaborate.

Post business editor Douglas Feaver said that “we stand by the story.” He added that because the SEC offered no specifics, “we don’t understand what the statement means.”

Fidelity spokeswoman Anne Crowley said, “There is no investigation by the SEC into any personal trading activities of any portfolio managers or investment professionals at Fidelity.”

“We were in contact with the SEC [Friday],” Crowley said, and the conversation made Fidelity “more comfortable” with its earlier denial. Robert Pozen, Fidelity’s general counsel, made the contact, she said.

She said there was “broad consideration of personal trading issues” by the SEC in 1993 and 1994 but that “we have not heard from the SEC on those matters in well over a year.”

Boston-based Fidelity, the nation’s biggest mutual fund company, has more than 100 stock funds, managing $428 billion for nearly 10 million customers.

“I don’t have anything to say,” Vinik said when asked for comment about the report. Fidelity declined comment on behalf of the other managers.

In addition to Vinik, the Post said the SEC is examining the trading of Larry Greenberg, manager of Fidelity’s Emerging Growth and VIP Growth funds; Michael Gordon, manager of its Retirement Growth fund; and Harris Leviton, manager of its Advisor Strategic Opportunities Fund, the Post said.

Ex-Fidelity employees being examined include Larry Bowman, a former fund manager; Jeff Feinberg, who was Vinik’s assistant at Magellan, and Steve Shapiro, a former technology analyst, according to the newspaper.

The former Fidelity executives declined comment through their current firms.

Fidelity has a code of ethics that sets rules for personal trading by its managers, Crowley said.

Managers can’t buy or sell a stock in their personal accounts for seven days before or after their fund buys or sells the stock, Crowley said. If they hold a stock for fewer than 60 days, they must give back any profits they reap to the firm.

Fidelity requires managers to clear all equity purchases with the firm’s trading group, which can prohibit investments if they may cause fluctuations in securities held by its funds. All personal investments must be reported monthly and are reviewed periodically by the firm’s auditors and by the SEC.