Oct 26 (Reuters) - Massachusetts’ top securities regulator charged Bank of New York Mellon with fraud for having allegedly overcharged the state’s pension fund on currency trades for more than a decade.
In an administrative complaint, Secretary of the Commonwealth William Galvin said that the bank had applied undisclosed markups in currency trading while acting as a custodian for the state’s $46 billion pension fund.
“In reality, BNY Mellon’s Standing Instruction Service was a hidden scheme that rigged the pricing of non-negotiated foreign exchange transactions while maximizing profits for the bank,” Galvin said in the complaint.
Massachusetts has now joined a handful of states that are taking action against companies like BNY Mellon and Boston-based State Street Corp , saying they cheated public pension funds on currency transactions by failing to charge the funds the rates that the banks paid, and instead forcing them to pay the day’s highest rates and pocketing the difference.
An audit by Massachusetts shows that BNY Mellon, the world’s biggest custodial bank, overcharged Massachusetts by $30.5 million since 2000. The state’s treasurer, Steven Grossman, said earlier this year that Massachusetts had paid nearly eight times as much as other customers did for certain transactions.
The state may now drop BNY Mellon as its partner in foreign exchange trading as it interviews candidates to conduct this business, Reuters reported on Tuesday.