JPM and BNY Mellon's FX Case Dismissed - Analyst Blog
Recently, the U.S. District Judge overthrew foreign exchange
(FX) pricing-related allegations against
JPMorgan Chase & Co
The Bank of New York Mellon Corporation
). Both the banks were accused of overcharging clients in FX
The individual lawsuits were connected with the "standing instruction" services related to FX trading. Under this, the clients of JPMorgan and BNY Mellon gave the banks consent to decide the prices of FX transactions instead of negotiating themselves.
The U.S. District Judge, Lewis Kaplan, dismissed the FX lawsuit against BNY Mellon citing that the stockholders lacked adequate evidence to prove that the board members of the bank were aware of the misrepresentations and did not take any corrective measures.
The stockholders of BNY Mellon accused the board members of ignoring the standing instruction services related to FX trading and not abiding by their fiduciary duties. Further, the bank was accused by the customers of generating profits on these transactions by overlooking their interests.
The FX lawsuit against BNY Mellon was filed by the Iron Workers Mid-South Pension Fund and California resident Marilyn Clark. As per the complainants, the fraudulent practices adopted by the executives and directors over the past several quarters led to the bank incurring over $2 billion in liabilities, besides adversely affecting its earning per share, credit rating, share prices and reputation. Due to this, the plaintiffs demanded the executives and directors to compensate the bank for the damages incurred.
On the heels of this dismissal, U.S. District Judge Denise Cote rejected the FX lawsuit against JPMorgan that alleged the bank of breaching its fiduciary duty to its custodial clients by charging concealed and enormous mark-ups on trading currencies. However, the Judge ruled that the bank had divulged the mark-up in prices in its public databases and trade confirmations.
The FX lawsuit against JPMorgan was filed by the Louisiana Municipal Police Employees' Retirement System. Moreover, they pursued a class-action status on behalf of pension fund custodial clients.
The lawsuit dismissal brings partial reprieve for both BNY Mellon and JPMorgan as it would have severely pressurized the company's financials. However, such litigation overhangs are apprehended to compel the customers of these banks to reconsider their business ties.
JPMorgan carries a Zacks Rank #2 (Buy) whereas BNY Mellon carries a Zacks Rank #3 (Hold). Other banks worth considering include Citigroup, Inc . ( C ) and KeyCorp . ( KEY ) with a Zacks Rank #2 (Buy).
BANK OF NY MELL (BK): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
KEYCORP NEW (KEY): Free Stock Analysis Report
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