Two California pensions and one Iowa-based retirement system are suing six Wall Street banks for collusion in the stock-lending market.
The class-action lawsuit sees the Iowa Public Employees’ Retirement System (IPERS), Orange County Employees Retirement System (OCERS), and Sonoma County Employees’ Retirement System (SCERS) going head-to-head with Bank of America Corp., Credit Suisse Group AG, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Morgan Stanley & Co., and UBS Group AG.
The pensions claim that the banks have been overcharging investors and blocking competition since 2009 in order to control the $1 trillion stock loan market through an entity called EquiLend, which was also named as a defendant. EquiLend is owned by various banks, including the six defendants. In addition to saying the banks “took collective, illegal action to boycott, attack, and acquire multiple entities who tried to increase competition and lower costs in the stock loan market,” the suit also suggests that the loan market has not kept up with technology—leading to a system that requires borrowers and lenders to obtain middlemen known as prime brokers.
The plaintiffs and their private lawyers, Cohen Milstein Sellers & Toll PLLC and Quinn Emanuel Urquhart & Sullivan LLP, are seeking to extract penalties for the alleged wrongdoing.
“IPERS is proud of its role in leading this lawsuit and its efforts to get compensation for investors damaged by the lack of competition and transparency in the stock lending market,” IPERS spokeswoman Judy Akre said in a statement. “IPERS has a fiduciary duty to advocate for IPERS’ participants and beneficiaries, and protecting them from investment banks’ collusion and anti-competitive behavior is in accordance with that duty.”
“Major investment banks are conspiring to preserve their profits at the expense of everyday investors,”Michael B. Eisenkraft, plaintiffs’ attorney and a Partner at Cohen Milstein Sellers & Toll said in a statement. “Through various improper means, the likes of Goldman Sachs and Morgan Stanley have for years colluded to maintain their power over this little-known-but-lucrative corner of Wall Street. In doing so, they deprive investors of money that should flow to retirees, families and other hard-working Americans.”
EquiLend, UBS, J.P. Morgan, and OCERS declined comment. Representatives from SCERS, Morgan Stanley, Credit Suisse AG, Bank of America, and Goldman Sachs were unavailable for comment.