As per a Reuters report, after the pension funds related charges, Bank of New York Mellon Corp. (BK) is now being pressured by Fidelity Investments – one of the largest mutual funds and financial services groups – to maintain stringent pricing standards on foreign currency trades. As mentioned in a number of lawsuits filed against BNY Mellon, Fidelity has also been overcharged by the bank in pricing on certain foreign exchange (:FX) trades having standard order.
BNY Mellon is not the only bank to have been accused by the states for overcharging the pension funds in relation to FX trades. Back in 2009, the state of California had charged State Street Corp. (STT) for improper pricing of foreign exchange for California pension funds.
The banks had resorted to such fraudulent moves driven by the downtrend in foreign-exchange business due to volatile markets. In the third quarter of 2012, BNY Mellon recorded total revenue of $121 million for foreign-exchange trading, plummeting 45% on a year-over-year basis.
Therefore, BNY Mellon, leveraging on clients like Fidelity, overcharged them for extra revenue and subsequently entangled itself in a number of lawsuits filed by the U.S. Department of Justice (:DOJ) and others. In the U.S. District Court in the Southern District of New York, BNY Mellon is fighting a civil fraud case of more than $1 billion, pursuing by the Justice Department. The bank squabbles in court filings arguing its trade-pricing policies were allowable and did not violate any laws.
Though Fidelity has not filed any lawsuit against BNY Mellon, DOJ filings show that the mutual fund firm has faced losses worth over $50 million on standing instruction trades with BNY Mellon from 2007 to 2010.
BNY Mellon’s representative argued that the bank’s foreign-exchange products continued to grow attributable to client demand and market conditions, while refraining from any comments on Fidelity.
Owing to such issues, customers have grown wary and are dem
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