Back to top

Analyst Blog

In a recent development, New York state judge ruled that the lawsuit against The Bank of New York Mellon Corp. (BK - Analyst Report) filed by New York Attorney General should proceed. The New York Attorney General had accused BNY Mellon of deceiving its customers by overcharging them for foreign exchange (FX) transactions.

The litigation, filed in 2011 by New York Attorney General Eric Schneiderman, charged BNY Mellon of fraudulent representation wherein the bank did not provide the best possible prices to its customers including New York City pension funds, while conducting foreign currency trades. Moreover, the Attorney General alleged that the bank earned nearly $2 billon between 2001 and 2011 from this malpractice.

Over the past two years, several lawsuits have been filed against BNY Mellon over FX transactions. Many states including New York, Florida, California, Virginia, Ohio and Massachusetts have filed lawsuits against the company over similar allegations, such as misleading state and public pension funds, private companies, universities and banks via a scheme that overcharges foreign currency transactions.

Some of the foreign exchange (FX) pricing-related allegations against BNY Mellon have been dismissed whereas some others have been allowed to continue.

BNY Mellon is not the only company that has been accused by the states for overcharging the pension funds. Back in 2009, the state of California had charged State Street Corporation (STT - Analyst Report) for improperly pricing of foreign exchange for California pension funds.

Last month, the U.S. District Judge overthrew foreign exchange (FX) pricing-related allegations against JPMorgan Chase & Co. (JPM - Analyst Report). The bank was accused of breaching its fiduciary duty to its custodial clients by charging concealed and enormous mark-ups on trading currencies.

The contract between BNY Mellon and New York City pension funds is on the verge of expiration. Alongside, The New York City pension fund intends to hire State Street as its new custodian. This would result in BNY Mellon losing it customers, thereby reducing its client base. Moreover, the litigation cost involved is expected to elevate BNY Mellon's overall expenses.

BNY Mellon currently carries a Zacks Rank #3 (Hold). Among others, BankUnited, Inc. (BKU - Analyst Report) is a better performing bank with a Zacks Rank #1 (Strong Buy).  

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%
STRATTEC SE… STRT 80.24 +3.00%