Please note: As of January 20, 2021, information in some news releases may be out of date or not reflect current policies.
US Labor Department reaches $84 million settlement with BNY Mellon
WASHINGTON — The Bank of New York Mellon has agreed to repay $84 million to employee benefit plan customers who were victimized through the bank's "standing instruction" foreign exchange trading program. The agreement was reached as part of a larger settlement that resolves private lawsuits against the bank as well as suits brought by the U.S. Department of Justice and the New York State Attorney General.
"This case is a reminder that financial institutions charged with safeguarding retirement plan assets, sometimes put the institution's interests ahead of those of the investors they represent," said Secretary of Labor Thomas E. Perez. "Today's settlement offers more proof that when they do so, we at the department along with our colleagues at federal and state agencies will hold them accountable."
An investigation by the department's Employee Benefits Security Administration found that, for most standing instruction foreign currency exchange transactions with customers, including retirement plans, the bank assigned nearly the worst prices at which currencies had traded in the market during all or part of a day. At the same time, the bank was leading its clients to believe that it was pricing their transactions in a more favorable manner. The department concluded that the bank misrepresented and failed to disclose to clients how it was pricing the transactions and that the bank had engaged in a deliberate, prolonged effort to conceal its pricing methods. The department determined that the bank's failure to work prudently and solely in the interest of the plans, its dealings with plan assets to benefit itself, and its misrepresentations and failures to disclose its activities were all breaches of the bank's fiduciary duties to the plans and violated the Employee Retirement Income Security Act.
The "standing instruction" foreign currency exchange program is a service that the bank offered to customers who needed to exchange currencies on a regular basis. For clients who used this program, the bank automatically exchanged the currencies at a rate and time that the bank, in its sole discretion, determined. The department's investigation found that the bank habitually assigned its "standing instruction" customers rates that were close to the worst rates that the currencies had traded previously during the day. In addition, the department found that the bank gave certain "standing instruction" clients better rates than were offered to virtually all of its other plan customers. Such favoritism is prohibited by ERISA.
The investigation leading to this settlement was conducted by the EBSA New York Regional Office. Employee benefit plan participants in need of assistance can contact EBSA at 866-444-3272 or through http://www.dol.gov/ebsa/contactEBSA/consumerassistance.html.