Post by UKIPA Holdings, LLC on Mar 20, 2015 18:51:48 GMT 4
Bank Of New York Mellon Admits Civil Fraud In $714M FX Settlement
Bank of New York Mellon BK +0.17% admitted on Thursday it misrepresented the pricing and execution of foreign exchange trades it made on behalf of clients over the course of multiple years. The admission came as part of a $714 million settlement that resolves long-running litigation between the bank, a handful of regulatory bodies, and a class action lawsuit filed by its customers. Bank of New York Mellon also will fire David Nichols, head of product management at the bank, in addition to other executives responsible for its misrepresentations.
BNY’s misconduct, made over a span of years, centers on how it represented pricing to its clients in foreign exchange markets. While BNY said it was providing the “best rates” and “best execution” on forex pegged to interbank rates, the firm was actually giving its clients the worst reported price on those rates. The distinction, meant that clients who thought their forex trades were done at the best available market price at the time of execution were actually receiving prices at the far margin of interbank ranges, where pricing is the worst.
In addition to admitting to the allegations in plaintiffs and the government’s civil fraud case, BNY also agreed to pay a total of $714 million to settle lawsuits brought by the U.S. government, the State of New York, the Securities and Exchange Commission, the Department of Labor and private investors. The bank will pay a civil penalty of $335 million to the United States and New York State, collectively, money that will go in to a fund that compensates customers who were victims of BNY’s misconduct, including state agencies such as the New York State Deferred Compensation Plan and the State University of New York system.
BNY will also pay $335 million to resolve private class action lawsuits filed by the Bank’s customers. The government’s lawsuit was brought under the Financial Institutional Reform, Recovery and Enforcement Act and New York State’s lawsuit was brought pursuant to the Martin Act, which permits the State to seek damages and other relief for fraud. BNY will also pay $14 million to its Employee Retirement Income Security Act plan customers, in addition to $70 million from other settlements, to resolve claims with the Department of Labor.
“The Bank, after three years of litigation, has finally admitted what was always clear from the evidence – contrary to its various representations, including a claim of ‘best rates,’ the bank in fact gave clients prices at or near the worst interbank rates reported during the trading day. The bank repeatedly deceived its customers and is paying a heavy penalty for it,” said Preet Bharara, Manhattan U.S. Attorney.
“The Bank of New York Mellon misled customers and traded at their expense. Today’s settlement shows that institutions and individuals responsible for defrauding investors will be held accountable and will face serious consequences for their wrongdoing,” added New York Attorney General Schneiderman.
“We are pleased to put these legacy FX matters behind us, which is in the best interest of our company and our constituents,” BNY said in a Thursday statement. “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 added.
Bank of New York shares were little changed on Thursday evening.
Article: www.forbes.com/sites/antoinegara/2015/03/19/bank-of-new-york-mellon-admits-civil-fraud-in-714m-fx-settlement/
Bank of New York Mellon BK +0.17% admitted on Thursday it misrepresented the pricing and execution of foreign exchange trades it made on behalf of clients over the course of multiple years. The admission came as part of a $714 million settlement that resolves long-running litigation between the bank, a handful of regulatory bodies, and a class action lawsuit filed by its customers. Bank of New York Mellon also will fire David Nichols, head of product management at the bank, in addition to other executives responsible for its misrepresentations.
BNY’s misconduct, made over a span of years, centers on how it represented pricing to its clients in foreign exchange markets. While BNY said it was providing the “best rates” and “best execution” on forex pegged to interbank rates, the firm was actually giving its clients the worst reported price on those rates. The distinction, meant that clients who thought their forex trades were done at the best available market price at the time of execution were actually receiving prices at the far margin of interbank ranges, where pricing is the worst.
In addition to admitting to the allegations in plaintiffs and the government’s civil fraud case, BNY also agreed to pay a total of $714 million to settle lawsuits brought by the U.S. government, the State of New York, the Securities and Exchange Commission, the Department of Labor and private investors. The bank will pay a civil penalty of $335 million to the United States and New York State, collectively, money that will go in to a fund that compensates customers who were victims of BNY’s misconduct, including state agencies such as the New York State Deferred Compensation Plan and the State University of New York system.
BNY will also pay $335 million to resolve private class action lawsuits filed by the Bank’s customers. The government’s lawsuit was brought under the Financial Institutional Reform, Recovery and Enforcement Act and New York State’s lawsuit was brought pursuant to the Martin Act, which permits the State to seek damages and other relief for fraud. BNY will also pay $14 million to its Employee Retirement Income Security Act plan customers, in addition to $70 million from other settlements, to resolve claims with the Department of Labor.
“The Bank, after three years of litigation, has finally admitted what was always clear from the evidence – contrary to its various representations, including a claim of ‘best rates,’ the bank in fact gave clients prices at or near the worst interbank rates reported during the trading day. The bank repeatedly deceived its customers and is paying a heavy penalty for it,” said Preet Bharara, Manhattan U.S. Attorney.
“The Bank of New York Mellon misled customers and traded at their expense. Today’s settlement shows that institutions and individuals responsible for defrauding investors will be held accountable and will face serious consequences for their wrongdoing,” added New York Attorney General Schneiderman.
“We are pleased to put these legacy FX matters behind us, which is in the best interest of our company and our constituents,” BNY said in a Thursday statement. “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 added.
Bank of New York shares were little changed on Thursday evening.
Article: www.forbes.com/sites/antoinegara/2015/03/19/bank-of-new-york-mellon-admits-civil-fraud-in-714m-fx-settlement/