Home ListingMarch 20, 2015

BNY Mellon to Pay $714M in FX Charging Settlement

The bank was accused of overcharging clients for foreign exchange trades and pocketing the profits.

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BNY Mellon is to pay $714 million to settle multiple lawsuits alleging that it overcharged pension funds and other investors for foreign exchange trading.

The world’s largest custody bank was accused of deliberately quoting poor prices for clients in some FX transactions while taking better prices for itself and profiting from the spread, as well as favoring some clients over others.

The company has accepted responsibility for the conduct and has sacked David Nichols, head of products management, as well as other executives, according to Reuters.

“The bank repeatedly deceived its customers and is paying a heavy penalty for it.” —Preet Bharara, Manhattan US AttorneyIn a statement, BNY Mellon said clients who filed a class action lawsuit would share in a $335 million payout, while New York State, the Department of Justice, the Labor Department, and the Securities and Exchange Commission would also receive multi-million-dollar sums. New York State and the Labor Department have stated they will pass on the money to BNY Mellon customers.

New York State Attorney General Eric Schneiderman said the settlement “shows that institutions and individuals responsible for defrauding investors will be held accountable and face serious consequences for their wrongdoing. The outcome also shows what can be achieved when law enforcement agencies collaborate on an important matter such as this one.”

“BNY Mellon and its executives, motivated by outsized profits and bonuses, breached trust and repeatedly misled clients to believe that the pricing they were getting on foreign exchange was far better than it actually was,” said Manhattan US Attorney Preet Bharara. “The bank repeatedly deceived its customers and is paying a heavy penalty for it.”

“The outcome shows what can be achieved when law enforcement agencies collaborate on an important matter such as this.” —Eric Schneiderman, NY State Attorney General In 2012, sovereign wealth funds from Abu Dhabi, Kuwait, and Alaska were said to be among those involved in legal action against BNY Mellon. Endowments, banks, asset managers, and pension funds were all named among BNY Mellon’s FX customers. An amended lawsuit filed in June of that year alleged that the bank generated more than $1.5 billion from clients between 2007 and 2010.

BNY Mellon’s statement said the company was “pleased to put these legacy FX matters behind us.”

Last month the company restated its fourth quarter earnings statement to take into account an expected $598 million payment.