Back to top

Analyst Blog

Recently, The Supreme Court of the State of New York has rejected a dismissal plea of The Bank of New York Mellon Corporation (BK - Analyst Report). A lawsuit was filed by The Salvation Army accusing BNY Mellon of mismanaging funds.

The New York Judge has sustained three out four claims in the Salvation Army's lawsuit against BNY Mellon's gross negligence, breach of fiduciary duty and breach of contract. However, the claim for negligent misrepresentation was dismissed. The Salvation Army is seeking $22 million in compensation.

In Apr 2011, the southern division of the Salvation Army had filed the lawsuit alleging gross ignorance on part of BNY Mellon regarding the investment of the charity's funds. The Salvation Army's instructions of investing in less risky avenues were not followed by the bank. Rather, BNY Mellon went ahead and invested funds in perilous mortgage-backed securities. Consequently, when the markets collapsed, the Salvation Army suffered huge losses.

In its defense, BNY Mellon was quick to point that the investment strategy at during that particular period was prudent enough and it had meticulously executed the investment of the charity's funds. Further, the bank added that it was willing to challenge the charges in the court.

Presently, BNY Mellon is not the only bank facing problems over investment in mortgage-backed securities prior to 2008 financial crisis. Many financial institutions including JPMorgan Chase & Co. (JPM - Analyst Report), The Goldman Sachs Group, Inc. (GS - Analyst Report) and Bank of America Corporation (BAC - Analyst Report) have been embroiled in lawsuits over similar practices.

The litigation cost involved will definitely lift up BNY Mellon's expenses. In addition, the company faces numerous foreign exchange-related lawsuits, which will keep the litigation costs at elevated levels, thereby thwarting the efforts made by the company to contain the rising expenses.

Presently, BNY Mellon holds a Zacks Rank #4 (Sell).

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

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 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
SUPER MICRO… SMCI 26.98 +10.17%
CANADIAN SO… CSIQ 38.30 +8.07%
CENTURY ALU… CENX 26.97 +7.97%
BANCO DO BR… BDORY 16.69 +7.47%
WILLDAN GRO… WLDN 11.38 +5.86%