Fidelity investor guilty of insider training

Posted 11/30/09

BOSTON – A former Fidelity Investments trader was found by a federal jury in Boston to have engaged in insider trading in the stock of Covad Communications Group Inc., the U.S. Securities and Exchange Commission said.

Bloomberg News reported that David K. Donovan, of Massachusetts, knowingly gave his mother nonpublic information about the networking company’s shares, the jury found in a verdict returned on Nov. 20, the SEC said in a statement. The jury found Donovan’s co-defendant, David R. Hinkle of Texas, not liable for insider trading, according to the statement.

Donovan, a Fidelity trader until March 2005, got confidential information between July and September 2003 that Fidelity was buying Covad stock for investors, according to the SEC’s civil complaint. He arranged for purchases of the shares for his mother’s account in August 2003, according to the SEC.

Donovan was also named in another SEC suit, along with former head trader Scott DeSano and 11 employees, accused of accepting more than $1.6 million in gifts from brokers jockeying to trade for the world’s largest mutual fund company. Fidelity agreed to pay $8 million to settle those claims last year, while Donovan and others agreed to pay more than $1 million altogether.

Fidelity spokeswoman Anne Crowley said the Boston-based firm discovered trading irregularities in an internal review and alerted the SEC. The firm wasn’t a defendant in the case.

“Mr. Donovan is pleased the jury rejected the SEC’s claim that he provided insider information to broker David Hinkle,” his lawyer, Raipher D. Pellegrino of the Boston law firm Denner Pellegrino LLP, said in a telephone interview. Pellegrino said he was confident that the verdict against Donovan “will be overturned in the appellate courts.” •

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