BNY Mellon cuts fees to settle Massachusetts forex case
BOSTON (Reuters) - Bank of New York Mellon Corp will cut fees by $15.45 million to resolve a Massachusetts complaint over its handling of foreign exchange transactions, state officials said on Monday.
The deal resolves an October 2011 administrative complaint and is the only latest agreement by the bank with officials in various states who have probed its forex practices. BNY Mellon continues to face scrutiny in the area, however, including lawsuits brought by New York's attorney general and the Manhattan U.S. Attorney.
The $15.45 million is the discount that BNY Mellon agreed to provide over nine years on the custodial services fees it charges to Massachusetts' Pension Reserves Investment Management Board (PRIM), which oversees public retirement money, according to Massachusetts Secretary of State William F. Galvin.
In order to resolve the administrative complaint, the bank was also charged $100,000 for the cost of the investigation, Galvin said, and it agreed to change some forex trading procedures and policies.
In an interview, Galvin called the agreement a good result, especially as PRIM wanted to continue doing business with BNY Mellon.
In a separate statement, Massachusetts Treasurer Steven Grossman, who chairs the PRIM board, said the deal followed months of negotiations and drew on an independent audit of BNY Mellon's trades.
BNY Mellon spokesman Kevin Heine said, "We are pleased to reach this commercial agreement with PRIM, which allows us to continue our long-standing relationship with them." The company continues to defend itself against the claims in New York, he said.
BNY and its rival State Street Corp have been under pressure since private lawsuits emerged three years ago charging them with misleading clients about their forex fees.
State charges followed soon after including one in October 2011 in which Galvin alleged that BNY Mellon was improperly collecting the differences between the foreign-exchange prices it charged clients and the actual prices that BNY obtained for itself on markets.
BNY Mellon has been able to resolve some of the suits since then such as a $28 million deal reached with Florida officials in November.
PRIM said it will pay $750,000 to the whistleblower who originally called attention to the alleged overcharges. Its press release did not identify this person, but court filings show him to be former BNY Mellon trader Grant Wilson, who has been involved in other state cases as well.
Wilson's attorney, Philip Michael, declined to comment.