Cases & Deals

Fidelity obtains dismissal of all claims relating to alleged filing of suspicious activity report, affirmed by First Circuit

Client(s) Fidelity Brokerage Services LLC

Jones Day obtained a significant victory on behalf of Fidelity Brokerage Services, LLC in a lawsuit brought by two former Fidelity customers and their investment advisor. The customers and advisor claimed that they were investigated by the SEC and state regulatory agencies because Fidelity allegedly filed a suspicious activity report ("SAR") identifying them as having manipulated the market for the shares of a now-bankrupt Chinese medical device company. In August 2018, Chief Judge Saris of the U.S. District Court for the District of Massachusetts dismissed all thirteen of the customers and advisor's claims against Fidelity on various grounds. Most notably, Chief Judge Saris held that financial institutions such as Fidelity are immune under the Bank Secrecy Act ("BSA") from any liability arising from the alleged filing of a SAR.

In April 2019, the First Circuit affirmed this dismissal, holding that a plaintiff cannot avoid BSA immunity simply by alleging that a SAR accused the plaintiff of a legal violation that was "objectively impossible." The First Circuit also resolved in Fidelity's favor an issue of first impression in the circuit, holding that a district court applies its home circuit's interpretation of federal law in a case before it, even if that case was transferred to it from a district court in another circuit.

The former customers and investment advisors filed a petition for certiorari asking the United States Supreme Court to review the First Circuit's decision. Fidelity opposed the petition, and in February 2020, the Supreme Court denied the petition.

AER Advisors Inc., et al. v. Fidelity Brokerage Svcs., LLC, Nos. 19-347 (U.S.), 18-01884 (1st Cir.); AER Advisors Inc., et al. v. FMR LLC, et al., Nos. 1-17-cv-12214 (D. Mass.), 9-17-cv-80809 (S.D. Fla.)