SEC investigators leading the probe into Fidelity's trading desk are now questioning trades sent to the brothers of one Fido employee the Boston Globe reported Sunday. The paper based its article on attorneys and others involved in the case. If true, the report confirms the wisdom of the "camel's nose under the tent" saw cited by lawyers.

The paper reports the man who handles Fidelity trades at Banc of America Securities, Peter J. Donovan, is the brother of Fidelity trader David K. Donovan. At issue is whether David (the elder brother at 42) sent trades directly to Peter (37). If so, regulators are also wondering if Fidelity shareholders received the best pricing on those trades.

There is nothing improper with doing business with a relative as long as the fund shareholders still receive a fair deal.

The latest twist on the trading investigation came after the SEC subpoenaed Fidelity records as a part of a probe into whether an employee of Jefferies Company gave too valuable gifts to Fidelity traders.

A Fidelity spokesperson told the paper that Fidelity's trading costs are closely watched and are among the lowest in the business.

"If something came into play that would detract from the best execution," spokesperson Anne Crowley told the paper. She added that high-cost trading "would be identified very quickly. And if so, we would be very quick to find out why," and that a "good part" of compensation for traders is based on their efficiency.  

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