BNY Mellon FX Case Partly Dismissed - Analyst Blog
November 21 2011 - 5:45AM
Zacks
On Friday, The Bank of New York Mellon
Corporation (BK) won a partial dismissal of foreign
exchange (FX) lawsuit filed by the state of Virginia. The Fairfax
County Circuit Court Judge dismissed two of the three charges that
were filed against the company. But the main accusation of Fraud
Against Taxpayers Act remains.
In August, BNY Mellon had been accused by the state of Virginia
of failing to provide the best possible prices while making foreign
currency trades for the state pension funds. The lawsuit seeks
nearly $931.6 million from BNY Mellon in penalties and damages over
foreign exchange trades, executed for public pension plans in the
state.
BNY Mellon had allegedly charged the pension funds at the
highest price of the trading day instead of the actual inter-bank
rate at which the currencies were originally purchased. However, at
the next hearing of this case on December 21, the company will get
another chance to challenge this remaining charge against it.
This is not the only lawsuit filed against BNY Mellon for
alleged FX violation. Over the last few months, many states
including New York, Florida, California and Massachusetts have
filed cases against the company over similar allegations including
misleading state and public pension funds, private companies,
universities and banks in a scheme of overcharging for foreign
exchange.
BNY Mellon is not the only company that has been accused by the
states of overcharging the pension funds. Back in 2009, the state
of California had charged State Street Corp. (STT)
for improperly pricing foreign exchange for California pension
funds.
Our Take
The dismissal of a few allegations is of course a good sign for
BNY Mellon. While the company is under tremendous pressure due to
rising expenses, these lawsuits would further increase its costs.
Also, these FX lawsuits would force the clients to reconsider their
business ties with the company.
BNY Mellon currently retains its Zacks #3 Rank, which translates
to a short-term ‘Hold’ rating.
BANK OF NY MELL (BK): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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