To some observers, the biggest surprise was that Fidelity, of all places, would be under fire. The firm has a reputation for running a very tight ship. Then again, practically no one in the industry is a stranger to trading perks.

"Generally on Wall Street, lavish gifts and entertainment for traders have been built into the culture for years," says Burton Greenwald, a fund consultant based in Philadelphia.

As a result of the recent revelations, Fidelity, which is cooperating with probes by the National Association of Securities Dealers and the Securities and Exchange Commission, has tightened its policies and procedures with respect to gifts, gratuities and business entertainment. The statement said that while the firm came across violations of its policies and procedures, there were no instances of "inappropriate and unauthorized behavior" resulting in "any financial loss to the Fidelity mutual funds or to any shareholder" because of trades made by its funds.

The Wall Street Journal has reported that regulators are looking into instances where Wall Street firms lavished gifts on Fidelity traders, including pricey bottles of wine, trips to Las Vegas and Super Bowl tickets.

In addition, The Boston Globe has reported that federal regulators are examining whether a few Fidelity traders improperly sent trading business to siblings at brokerage houses. Fidelity said it hasn't found any instance where family relationships harmed the quality of any trades, though it's considering tightening its procedures in that area as well.

One of the blowup's biggest ironies involves Scott DeSano, who runs Fidelity's trading operation. Although he has been credited for substantially lowering the firm's trading costs, often to the detriment of Wall Street firms, Bank of America reportedly treated DeSano to several golf outings at the AT&T Pebble Beach National Pro-Am golf tournament.

It's all at odds with the image that many hold of Fidelity.

"I saw nothing significant in terms of gifts or favors or anything that would make a difference," says Peter Lert, a former quantitative analyst in Fidelity's equity trading department. During the early part of his tenure, he did see occasional "boxes of fruit or wine sent by brokers to traders. [But] it's hard to imagine any of the traders being influenced in their work by that kind of gift."

Although the NASD and the SEC have jurisdiction over this matter, the NASD has a rule in place addressing it directly.

The NASD prohibits any of its members from giving payments or non-cash gifts exceeding $100 per person annually. It also condones "an occasional meal, a ticket to a sporting event or the theater, or comparable entertainment which is neither so frequent nor so extensive as to raise any question of propriety and is not preconditioned on achievement of a sales target."

But with trading commissions steadily declining, thanks in no small part to the advent of electronic trading vehicles, Wall Street firms are under pressure to get business.

"Any money manager that's been around for 10 or 20 years has certainly had embarrassing situations where gifts have been awkward," says Theodore R. Aronson of Aronson+Johnson+Ortiz, an institutional money manager in Philadelphia.

Nevertheless, Aronson says, "Given the trends in the industry -- lower and lower commissions -- there will be less and less room in diminishing profit margins for lavish gifts. So be it."

The $100 annual gift limit makes sense, in his view. "Tickets to the Phillies at the end of a losing season? OK," he says. "Tickets to the final game of the World Series? Not OK."

Another Turn of the Tables

Last year, Morningstar, which tracks mutual funds, stocks and other financial products, freely served up opinions about the late-trading and market-timing scandals unveiled by New York State Attorney General Eliot Spitzer. Last week, the Chicago firm found itself on the receiving end of a subpoena from Spitzer.

In a statement, Joe Mansueto, chairman and chief executive of Morningstar, said the subpoena "asks for information about investment consulting services we offer to plan providers, including fund lineup recommendations for retirement plan sponsors."

The firm said it is cooperating with the investigation.