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BNY Mellon Settles Part of Foreign-Exchange Trade Suit With U.S.

Bank of New York Mellon Corp. agreed to change its disclosure statements for so-called standing instruction foreign exchange transactions to partly resolve a lawsuit by U.S. prosecutors.

The bank won’t use the phrase “best execution” in describing its standing instruction service to clients or say that it’s free, according to the agreement approved yesterday by U.S. District Judge Lewis Kaplan in New York. The U.S. won’t seek a court order forcing the bank to disclose how it prices the transactions, according to the filing.

The lawsuit by U.S. Attorney Preet Bharara in Manhattan is one of several brought against the bank, alleging it defrauded clients in foreign currency trades.

The U.S. attorney in an Oct. 4 complaint claimed that BNY Mellon defrauded clients that used its standing instruction foreign exchange service, under which the bank automatically provides currency exchange when the client buys or sells foreign securities. The phrase “best execution” suggests that clients will be getting the best available exchange rate at the time of the transaction, according to the complaint.

“While we are confident that we have provided our clients and their investment managers with the information needed to make informed trading decisions, this agreement addresses disclosure questions raised by the U.S. attorney and is consistent with our ongoing commitment to implement enhancements that will benefit our clients,” the bank said in a statement yesterday.

Pricing Data

Under the partial settlement, BNY Mellon must disclose how transactions executed through its standing instruction service are priced and must make certain pricing data available to custodial clients, Bharara said in a statement yesterday.

The parties will continue to litigate the remaining claim in the lawsuit for civil penalties, according to the partial settlement agreement. The U.S. seeks “hundreds of millions” in penalties, Bharara said.

The case is U.S. v. Bank of New York Mellon Corporation, 11-6969, U.S. District Court, Southern District of New York (Manhattan).

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