Bank of New York Mellon Corp. (BK) agreed to a partial
settlement that forces the custodial bank to change some
disclosures about its foreign exchange services, the Justice
Department said Tuesday.
Shares were up 4.8% at $22.30 after hours. The Pittsburgh
Post-Gazette reported the news online earlier Tuesday, citing a
filing.
The settlement approved by District Judge Lewis A. Kaplan stems
from a civil complaint the department filed in October accusing the
institution of short-changing custodial clients using its foreign
exchange services since 2000.
The partial settlement didn't address the hundreds of millions
of dollars in civil penalties the federal government has sought for
the bank's alleged misconduct or resolve litigation from other
jurisdictions.
The allegations, also aimed at rival State Street Corp. (STT),
threaten to upend what has been a profitable business line for the
bank.
A Bank of New York spokesman on Tuesday said the company is
confident it provided clients and investment managers with the
information they needed.
"This agreement addresses disclosure questions raised by the
U.S. attorney and is consistent with our ongoing commitment to
implement enhancement that will benefit our clients," he said.
Specifically, the bank agreed to disclose how transactions made
through its standing instruction foreign exchange service are
priced and provide its custodial clients with periodic data on some
of its prices.
The agreement also allows the bank to say its standing
instruction service doesn't charge a separate fee or commission but
bars it from calling the service "free." Bank of New York Mellon
won't be allowed to suggest its standing instruction clients
receive the same pricing, either.
-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909;
Andrew.FitzGerald@dowjones.com