Bank of New York Asks Court to Dimiss New York’s Currency Trading Lawsuit
Stock Chart for Bank of New York Mellon Corp/The (BK)
Bank of New York Mellon Corp., the world’s largest custody bank, asked a court to dismiss the New York attorney general’s lawsuit accusing it of defrauding clients in foreign-exchange transactions.
Attorney General Eric Schneiderman sued BNY Mellon in October, saying it misled clients about the pricing of currency trades. BNY Mellon said in a filing yesterday in New York State Supreme Court that there was no fraud because clients were fully informed.
“Those allegations negate any possibility of fraud because a party that knows exactly what it is getting, and at what price, cannot, as a matter of law have been defrauded,” the bank said.
BNY Mellon made $2 billion over a 10-year period by defrauding public and private pension funds, the attorney general claims. The bank, which is also fighting lawsuits by Florida and Virginia and the U.S. attorney’s office in Manhattan, engaged in “a multi-pronged campaign of deception,” the attorney general said.
Schneiderman’s complaint focuses on BNY Mellon’s “standing instruction” program, in which a client gives the bank standing authorization to execute certain foreign-exchange transactions without negotiating the price of the purchase or sale in advance, according to the lawsuit.
BNY Mellon falsely told these clients they would get “the best rate of the day” and the “most attractive/competitive rate” available to the bank, when in fact they received the worst or almost the worst price at which the currency had traded in the interbank market, according to the complaint.
“This lawsuit is wrong, both on the law and on the facts,” Kevin Heine, a BNY Mellon spokesman, said in a statement. “It is based on a fundamental misunderstanding of the role of custodian banks and the operation of the global foreign currency market.”
BNY Mellon argued in its filing that customers “had all the material information they needed to assess the trades.” The bank each day published rates and executed standing-instruction transactions at rates “no less favorable” to the client than the published rates.
The bank then provided clients with confirmations or account statements accurately reflecting the actual price BNY Mellon applied to each transaction, it said. The bank wasn’t legally obligated to disclose its pricing methodology or its profit margins.
No reasonable customer thought it was offering the literal best rates, it said.
“In context, BNYM was not literally guaranteeing the best rate available for any kind of transaction, anywhere,” the bank said.
Danny Kanner, a spokesman for Schneiderman, declined to comment on the bank’s filing.
The case is People of the State of New York v. The Bank of New York Mellon Corp. (BK), 114735-2009, New York State Supreme Court (Manhattan).
To contact the reporter on this story: David McLaughlin in New York at firstname.lastname@example.org
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