Daily Management Review

BNY Mellon to pay $714 million to settle Forex trade suit


The Bank of New York Mellon has agreed to pay $714 million to resolve federal and state allegations that it defrauded pension funds and other clients.

The company, while agreeing to the compensation, admitted that it misled clients by telling them that they would provide the best rates available in a process designed to "maximize the proceeds of each trade" in the foreign currency exchange market. This misrepresentation by the investment services and management company has led to the clients getting assigned the worst or close-to-worst rates from trading sessions, according to the investigators in the case.

Even while Bank of New York Mellon was misleading its clients, the company itself got more favorable rates for its own foreign exchange trades and profited from the difference between those rates and the higher rates assigned to customers. All the questionable transactions by the company happened in 2012.

The US attorney in the case Preet Bharara said: "The Bank of New York Mellon's custody clients, many of whom are public pension funds and non-profit organizations, trusted the bank to be honest about the financial services it was providing and to deal with them fairly. BNYM and its executives, motivated by outsized profits and bonuses, breached this trust and repeatedly misled clients."

The company’s settlement will cover all allegations raised by both investigative agencies, as well as related actions by the Securities and Exchange Commission and the U.S. Department of Labor, plus class-action lawsuits filed by private customers. The company has noted that this settlement will resolve all the issues related to this misrepresentation case.

"We are pleased to put these legacy matters behind us, which is in the best interest of our company and our constituents. We continue to improve our product offerings to ensure they are meeting client demand and positioning clients to succeed in an increasingly complex financial environment," the company said in a formal statement.

Bank of New York Mellon has $28.5 trillion in assets under custody and/or administration, along with $1.7 trillion in assets under management.