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According to KlaymanToskes’ investigation, Fidelity solicited investors to purchase shares of its Ultra-Short Bond Fund by making statements that described the Fund as one that: (i) “seeks a high level of current income consistent with the preservation of capital”; (ii) “allocates its assets across different market sectors and maturities”; (iii) has a “similar overall interest rate risk to the Lehman Brothers® 6 Month Swap Index”; and (iv) is geared toward the “preservation of capital.”
It appears that these statements were misleading as Fidelity did not properly disclose to investors the risks associated with investing in the Fund, including that the Fund was: (i) failing to compete with the Lehman Brothers® 6 Month Swap Index; and (ii) heavily invested in high-risk mortgage-backed securities. Reportedly, the Fidelity Bond Fund invested two thirds of its assets in subprime related securities.
As of June 11, 2007, Fidelity began to decrease the share price value of the Bond Fund. Since that time, the value of the Bond Fund has continued to decline. By November 2007, the value of the per-share price had been reduced to below $9. The fund has fallen 6.8% this year and 13% over the past 12 months. Many investors have lost of significant amount of money due to the misrepresentation and omission of Fidelity.