Nov 9 A long-running class-action lawsuit accusing trading firms on the New York Stock Exchange of improperly executing trades for their dealer accounts ahead of their clients has reached an $18.5 million settlement, court records show.
The accord is between investors and firms that include Bank of America Corp and Goldman Sachs Group Inc. It was disclosed in court papers submitted to the U.S. District Court in Manhattan, date-stamped Oct. 26.
The plaintiffs accuse the trading firms of self-dealing and engaging in improper proprietary trading in their status as specialist firms for the New York Stock Exchange, which funneled trades through them.
U.S. District Judge Robert Sweet has scheduled a Nov. 28 hearing to consider approving the settlement.
In addition to Bank of America and Goldman, the defendants include LaBranche & Co Inc, at one time the largest specialists and now owned by Cowen Group Inc ; Bear, Stearns & Co, Inc, now owned by JPMorgan Chase & Co ; and Susquehanna International Group.
The litigation, which began in 2003, also named as a defendant the NYSE, which was accused of neglecting or abandoning its regulatory duties to oversee the firms. The NYSE reached a separate settlement in 2010.
Of the $18.5 million in the proposed settlement, $750,000 has already been paid by defendant Van der Moolen Holdings, N.V., a Dutch equity trading firm that filed for bankruptcy in 2009, according to court papers.
The settlement provides that investors may seek additional compensation in Van der Moolen's Netherlands bankruptcy proceedings.
In a motion filed on Thursday, the other defendants said they continue to deny wrongdoing or liability as part of the settlement.
Spokespeople for the defendants either declined comment or did not respond to requests for comment.
David Mitchell, a lawyer for the plaintiffs with Robbins Geller Rudman & Dowd, did not respond to a call and email seeking comment.
The papers were not filed electronically with the court as of Nov. 9. They were obtained at the court by Reuters after other records filed Thursday made reference to the settlement.
The alleged self-dealing by the specialist firms was at the center of an earlier $240 million settlement, in 2004, between the five biggest firms and the U.S. Securities and Exchange Commission.
Later in 2004, Judge Sweet declined to dismiss the class action, though he said investors would not be allowed to recover funds relating to trades that were covered in the regulatory settlements.
The lead plaintiff, California Public Employees' Retirement System, later moved to have the case certified as a class action. Sweet granted that request in 2009.
The NYSE reached a settlement in the class action in 2010 after nearly all the claims against it were dismissed. As part of the deal, it agreed to cooperate with CalPERS as it continued to pursue the lawsuit.
The case is In Re: NYSE Specialists Securities Litigation, U.S. District Court, Southern District of New York, No. 03-cv-08264.