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PSA: Fidelity account holders who are active need to pay more attention than usual to their cash balances and open trade orders. For about a month now, Fidelity is having some sort of problem with their systems that will allow you to place trades that add up to more cash than currently settled in the account (then will later liquidate some of your holdings to cover their errors) and/or that will prevent you from placing trades for the amount of cash currently settled in the account. They seem to get each individual instance corrected within a week without the account holder needing to do anything, but it can cause significant problems in the meantime. How do I know this? I experienced it and a manager at the Fidelity trade desk admitted it to me (only after half an hour trying to blame their system failure on me and hoping I would just go away). I understand that it may be as hard to understand the problem as it is for me to explain it, so I’ll give a specific example of what is occurring to try to clarify. Sorry about the length, but I’m trying to explain clearly. If you don’t want to read it, don’t. No need to tell me that or ask for a TLDR … just move on.
For thirty-something years now, I’ve had a personal account at Fidelity from an old 401k rollover. I use that account for relatively short-term investing, so I’ve been active in it weekly for all those years. About 3 weeks ago, I noticed something extremely odd that never happened before. The cash balance was exactly $0.00. Since I always have a long list of open GTC crash bids (Good ‘Til Canceled open orders to add to existing holdings at ridiculously low prices in the event of a flash crash), the cash balance in this account is always anywhere between ~$20k and ~$40k, with random dollars and cents details depending on what I had bought and sold recently (i.e. $31,462.84). In other words, to get an exactly $0.00 balance in such an active account, I would’ve had to sell and buy many different holdings that offset each other down to the exact penny. Not impossible, but extremely improbable.
So I called Fidelity to see what’s going on. Initially, their first-line customer service rep tried to confuse, blame, and pacify me with some lame excuses he thought I wouldn’t understand. As I mentioned, this is just a legacy retail/play personal account. I’m actually a professional investor so I understood all the irrelevant terminology he tried to throw at me. When I accurately shot down every one of the excuses and he was clearly (by his own admission) jst as confused as me by what he was seeing, he agreed to connect me to a manager at the trade desk. After she briefly tried the same deflect and blame tactic and realized it wasn’t going to work, she admitted that they were having a problem with their systems that temporarily (for days at a time) displayed incorrect cash balances in some active accounts. That system failure caused some of my open buy orders to execute in amounts higher than the cash settled from my executed sell orders. That normally is impossible. This manager went on to say that Fidelity couldn’t assume the costs for these errors it caused, so my “only options” were to immediately (within 24 hours) transfer the ~$20K cash into the account to cover the imbalance or the next day Fidelity would start liquidating my holdings until the imbalance is covered. I chose to transfer in about half and raise the other half by trimming a few holdings. Sure, I could’ve gotten our attorneys involved and spent the next few years fighting Fidelity and likely still losing due to some fine print in their contract, but it was more important to me to get it resolved quickly so I could just move on. YMMV
I’m posting this now because it happened to me again yesterday. Luckily, this time I caught it since I already knew from that prior experience how/why my account is doing weird things it had never done before in several decades. So, if you have a Fidelity account in which you’re active regularly buying and selling securities, pay much closer attention to your cash/settled balances and timing than you normally would. At least until this problem is resolved, which it’s now clear isn’t going to happen in a matter of hours, days, or weeks. My guess is not everyone who has an active account has the ability to unexpectedly transfer in cash to cover Fidelity’s system failures.
Edit: I want to be clear this is not intended as an attack on Fidelity. Yes, they screwed up, bad, and I’m pissed. However, I also know from experience that similar things happen at ALL of the brokers, which is why I’m not going to bother switching unless this problem continues indefinitely and/or worsens.