Massachusetts Claims it was Overcharged for Forex Trades


Massachusetts may join California, Virginia and Florida in suing Bank of New York Mellon Corp. for allegedly overcharging the state’s pensioners for foreign exchange trades, according to Carrick Mollenkamp’s Wall Street Journal article entitled “New Front Opens in Massachusetts for Forex Dispute.” Federal agencies are reportedly investigating.

Massachusetts’ treasurer and pension executive director were harshly critical of BNY Mellon, alleging it overcharged the $50 billion Massachusetts Pension Reserves Investment Management board by more than $20 million for foreign exchange trades between Jan. 1, 2007 and May 11, 2011.

In a statement, BNY Mellon was quoted as saying it “is confident that it provides clients and their investment managers with competitive and attractive FX pricing. Describing our pricing as ‘overcharging’ is wrong and ignores the substantial, cost-effective benefits our service provides to our custody clients and their professional investment managers.”

But BNY Mellon is on record as admitting it did not act in its clients’ best interests in pricing foreign currency trades, according to a Wall Street Journal article by Carrick Mollencamp and Tom McGinty entitled “Inside a Battle Over Forex.” There the bank said its clients are to blame because they knew or should have known what was going on.

BNY Mellon is a “custody” bank that handles securities and back-office tasks for institutional investors, such as public pension plans.

A Wall Street Journal study revealed that BNY Mellon priced 58% of foreign exchange (“forex”) currency trades near the point of the day’s trading range that was least favorable to its customers/clients.

BNY Mellon apparently confirmed the WSJ’s conclusion saying that it tends to price forex trades at one end of each day’s “interbank” trading range, but said there was nothing improper about the practice.

Massachusetts is weighing its legal options according to Massachusetts Treasurer Steven Grossmanat, who said that his office, the pension board, and the Massachusetts attorney general will explore legal options to recoup the excess foreign-exchange costs.

Massachusetts’ analysis found that BNY Mellon charged the pension fund an average of nearly 0.31 percentage point for “non-negotiated” trades, where the average industry cost was 0.04 percentage point.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities and commodities related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. The firm is actively investigating forex fraud claims. For further information, please contact us.