Coming from yesterday’s announcement of BNY Mellon to near a settlement of $700 million for the alleged FX fraud, it has been officially confirmed today. With a substantial increase to $714 million, BNY Mellon seals FX lawsuit with its offenders.
Comparing with the previously aimed sum, the astronomic $598 million, this newly settled agreement is in fact an increment of 19%. Basically, close the to colossal settlement of Citigroup and Barclays for a FX manipulation case, which has been announced yesterday at the agreement of $800 million.
From the final paid sum, a distribution of the penalty has been made as follow: $335 million to the bank’s clients, who filed the lawsuits. Another $335 million will be paid to the US and New York State, whilst $167.5 million is reserved for the civil penalty. Last but not least, $14 million will be paid by BNY Mellion to the ERISA plan clients, in order to settle the DOL’s demands.
Aside the monetary sanctions, the Federal authorities has penalized and terminated a number of the bank’s executives, including BNY Mellon head of products, Mr. David Nichols. In a further comment the New York State Attorney General, Schneiderman, commented the following upon the case and any further misconduct in the future: "Today's settlement shows that institutions and individuals responsible for defrauding investors will be held accountable and will face serious consequences for their wrongdoing."
Accusation on "best execution"
Relating back to the topic, BNY Mellon has been under relentless scrutiny ever since the earlier mentioned year 2009, for being alleged with over-charging foreign exchange fees. In more detail, it has been publicly made aware that BNY Mellon convinced its clients of the most profitable execution, however in reality the bank provided them the worst rates imaginable. At the same time, the bank would secure excelling spot prices for its own sake, whilst profiting on the spread. Having retrieved these findings on the misconduct of BNY Mellon, the offenders, which are in this case US leading pension funds, immediately filed an elaborate lawsuit.
As BNY Mellon nears an agreement with the pension funds, the bank is about to close down another appalling chapter. As back in late 2013, BNY Mellon just put an end to a lawsuit case from the from the Justice Department, paying off $15.45 million to the state of Massachusetts’ public pension funds, for the allegations on a scheme of defrauding custodial customers that were using the bank’s FX services.