SEC looks at mother of ex-Fidelity trader

Agency to compare investing moves of fund firm, woman

Regulators are investigating trading in the account of the mother of a former Fidelity Investments trader to see if there is any connection to positions the mutual fund giant was taking in stocks, the trader acknowledged yesterday.

David K. Donovan Jr., who left his position this week as one of Fidelity's highest-rated traders, said the issue involved a single trade by his mother that ''had nothing to do with me," and he was confident the inquiry would turn up nothing amiss.

In particular, investigators are looking at trading in the account of Donovan's mother, Concetta Donovan, in shares of Covad Communications Group Inc., according to attorneys involved in the case. Covad, a provider of high-speed telecommunications services, traded as high as $60.17 at the height of the bull market, but now languishes in the low single digits. It closed yesterday at $1.24.

Concetta Donovan, a prominent artist in Marblehead, did not return calls for comment.

The situation with Donovan and his mother's trading account is yet another avenue of many the Securities and Exchange Commission has been pursuing at Fidelity involving its vaunted and powerful stock trading desk. The securities regulators have been looking into whether Fidelity traders steered businesses to brokers who provided them with the most lavish gifts and entertainment, and not necessarily the best deal on stocks.

Among the perks regulators are investigating are trips to the Super Bowl, the Wimbledon tennis tournament, and exclusive golf courses, as well as fancy meals and expensive wine.

The SEC declined to comment on its investigation.

Securities attorneys said generally in such situations, regulators would be trying to determine whether an employee or outside party such as a relative profited from inside information by seeing if there is a pattern of trading in a personal account that would either precede or mirror the trading by the mutual fund company.

But Donovan said the trade involving his mother was an ''innocent" transaction in which he ''didn't profit. There is no issue. I didn't have anything to do with it." He also said that given the SEC investigation, it was natural for investigators and the company to be looking into trading situations involving relatives.

Indeed, regulators also are probing whether some of the Fidelity traders may have inappropriately steered fund trades to their brothers or relatives who work at securities firms that do business with the mutual fund giant. Brokerage firms, for example, have been asked to disclose if any of their employees have relatives who work at Fidelity, according to attorneys involved in the case.

For example, Donovan conducted trades with his brother Peter, a senior sales trader at Banc of America Securities in Boston, who was on the team of brokers that handled the firm's Fidelity business. Banc of America Securities spokeswoman Jennifer DiClerico said Peter Donovan no longer worked at the firm as of Wednesday. Peter Donovan declined to comment last night.

David Donovan's attorney, Raipher D. Pellegrino, said he would have no further comment.

Fidelity refused to comment on Donovan, citing employee confidentiality issues. But a company spokeswoman, Anne Crowley, said Fidelity has ''a wide array of policies and procedures that provide employees guidance on appropriate behavior and how we conduct business. If we find violations of our code, we take actions. We take these matters seriously and take disciplinary action, up to and including dismissal."

Fidelity's code of ethics has provisions that sharply limit the opportunities its investment employees, including traders, have to trade personally in stocks that the company itself is taking positions in.

Donovan is the fifth Fidelity trader to leave the firm since the SEC began its investigation. In December, Fidelity disclosed that it disciplined 14 employees for violations of its gifts and gratuities policies, and said it was tightening procedures in this area.

Fidelity also has said its own investigation had not uncovered any instances where family relationships among its employees and relatives at brokerage firms ''resulted in any harm to Fidelity mutual funds," or where any ''inappropriate and unauthorized behavior on the part of any individual" resulted in investors being shortchanged on stock trades.

Andrew Caffrey can be reached at caffrey@globe.com.