04 Feb Investors file claim against Fidelity related to NH financial advisor’s risky investments

Four ex-clients of former New London-based financial advisor Thomas Chadwick, who was ordered to pay more millions in restitution to investors — including many on fixed incomes — who lost money on high-risk investments, have filed a claim against Fidelity Brokerage Services saying the firm “failed to protect its customers” while Chadwick used its platform.

In April 2024, Chadwick agreed to a nearly $6 million settlement that includes paying nearly $5 million in restitution to investors who lost money on high-risk securities.

Under the terms of a consent order reached with the New Hampshire Bureau of Securities Regulation, Chadwick, formerly of the investment adviser firm Chadwick & D’Amato, was ordered to pay $4,858,365 in restitution to former clients, many of whom are New Hampshire and Vermont residents. Chadwick was also required to pay $1 million in costs and penalties, officials said.

The Bureau of Securities Regulation alleged that Chadwick committed investment adviser fraud that resulted in more than $11.1 million in client losses.

According to the Secretary of State’s Office, Chadwick’s clients were primarily low- to moderate-risk investors, with most categorized as elderly and retired people relying on fixed-income disbursements.

Now, four ex-clients of Chadwick have filed a statement of claim with the Financial Industry Regulatory Authority’s (FINRA) Dispute Resolution Services against Fidelity, charging the firm with breach of fiduciary duty, negligence, negligent misrepresentation, breach of contract, failure to supervise, aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and violations of federal securities laws and FINRA rules.

“Using Fidelity’s platform, Thomas Chadwick lost his clients’ life savings through extremely risky investments and committed fraud,” Jason Kane, an attorney with the firm Peiffer Wolf Carr Kane Conway & Wise, said. “If Fidelity had appropriate supervisory systems in place, this never would have happened.”

Richard Bates of Enfield said he suffered hundreds of thousands of dollars in losses.

“I considered Tom Chadwick a friend as well as an advisor,” Bates said in a statement. “When we retired, it felt comfortable and natural to trust Chadwick, who invested through industry icon Fidelity, to manage our retirement portfolio. Instead, Chadwick’s negligent and improper mismanagement and Fidelity’s lack of oversight cost us the bulk of our savings, forcing us both back to work in order to pay our bills and shattering our retirement dreams.

“The emotional distress has been devastating.”

Judy Barker of West Lebanon said her family investments were made through Fidelity for many years, claiming she suffered approximately $180,000 in out-of-pocket losses.

“We had no reason not to trust this company,” Barker said in a statement. “Had there been more oversight of these funds on Fidelity’s part perhaps we would still be living in the forever home that we built for our retirement years.”

According to the statement filed with FINRA, Chadwick opened his own New London-based firm around 2001, mainly serving retirees and older customers in New Hampshire and Vermont.

According to the consent order reached with the New Hampshire Bureau of Securities Regulation, between the fall of 2017 and December 2021, Chadwick invested most of his clients’ money into “a risky, complex security product” that was traded under the ticker symbol REML. REML was composed of unsecured debt securities not backed by collateral.

REML’s prospectus, which acts essentially as a warning label for the product, emphasized its volatility and stated investors could lose some or all their investment, especially if they held it in their accounts for longer than a month.

Additionally, the prospectus did not recommend the product to investors who require fixed income payments from their investment accounts, the petition states.

“Despite this, Chadwick frequently concentrated between 50 to 92 percent of his clients’ total investment portfolio values on REML,” Bureau of Securities Regulation officials said in a statement. “He held REML shares in their accounts for an average of 386 days.”

REML’s share price fell steadily from the mid-$20 range in late February 2020 to just 52 cents per share — its lowest value — on March 18, 2020.

At that time, securities regulators claim, Chadwick sold approximately 580,600 of his clients’ REML shares.

“Less than six days later, Chadwick encouraged his clients to repurchase REML shares with the hope that REML would recover,” securities officials said.

REML ultimately was called in December 2021, with shareholders receiving $5.98 per share, regulators said.

Securities regulators alleged that Chadwick displayed “a fundamental misunderstanding of REML’s complexity and risk,” failed to act in his clients’ best interests, and “breached his fiduciary duty of care and loyalty.”

In April 2022, the bureau filed a petition for emergency relief against Chadwick in a separate case, alleging he fraudulently used the usernames and passwords of 27 former clients to log into Fidelity brokerage accounts and make trades, causing a lockdown of those accounts.

“Fidelity failed to supervise for these activities, and only detected these matters after responding to investigations by state regulators,” the claim reads. “Had Fidelity detected Chadwick’s improper conduct pursuant to its supervisory duties, Claimants and customer losses could have been lessened or prevented.”

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Full Story: New Hampshire Union Leader January 30 2025