Securities Cases: Bank of America and Deutsche Bank Settle Agency Bond Rigging Litigation for $65.5M & Pension Funds Sue Citigroup, JP Morgan, and Other Big Banks Over Stock Lending Market Rigging Allegations

In the U.S. District Court in Manhattan, preliminary settlements have been submitted in which Deutsche Bank (DB) will pay $48.5M and Bank of America (BAC) will pay $17M to resolve investor lawsuits accusing them of manipulating the agency bond market for years. A judge must still approve the settlements.

Despite settling, both banks maintain they did not engage in any wrongdoing. The lead plaintiff investors include the Sheet Metal Workers Pension Plan of Northern California and the Iron Workers Pension Plan of Western Pennsylvania, and KBC Asset Management NV.

According to court papers and as reported by Reuters, Bank of America and Deutsche Bank are two of the 10 banks accused of rigging the $9 trillion agency bond market for supranational, sub-sovereign and agency bonds, also known as SSA bonds. The plaintiffs contend that from 2005 to 2015 the banks shared price information with one another, worked as a “super-desk” together, and allowed traders to coordinate strategies in the name of profit. Meantime, customers had to accept bond prices that were unfair to them.

Other banks that have been sued by investors over agency bond rigging include Citigroup Inc. (C), Credit Suisse Group AG (CS), Credit Agricole SA (ACA), BNP Paribas SA (BNP), Nomura Holdings Inc. (NMR), HSBC Holdings Plc (HSBC), Toronto-Dominion Bank (TD) and Royal Bank of Canada (RY). All of them have tried to get the lawsuits dismissed.

Pension Funds Sue Six Big Banks, Claim Stock Lending Market Rigging

Also, earlier this month, a number of US pension funds sued JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Bank of America, Morgan Stanley (MS), Credit Suisse (CS), and UBS AG (UBS) accusing them of conspiring to push back competition in the stock lending market. They allegedly boycotted lending platforms and threatened to intimidate clients.

Among the plaintiffs in that pension fund fraud case are the Orange County Employees’ Retirement System, the Iowa Public Employees’ Retirement System, and the Sonoma County Employees’ Retirement Association. The plaintiffs believe that the banks violated federal antitrust law by monopolizing the stock lending market. They claim that this action hurt investors and retirees who ended up paying high fees to take part in stock lending.

Stock Lending

With stock lending, the stock is lent to a firm or investor via a dealer or broker. The plaintiff pension funds believe that the banks colluded with each other to bring down stock lending platform AQS that would have let borrowers and lenders deal directly with each other.

Also named as a defendant is EquiLend. The stock-lending platform links up firms and banks seeking to borrow securities with parties that want to lend them. The six defendants are among the banks that own Equilend. According to the plaintiffs, the banks used Equilend LLC, which was a joint venture, to buy the intellectual property of SL-x, which was one of the developers of the AQS platform. They then rendered SL-x’s intellectual property inactive. The pension funds believe that Equilend was set up to protect the bank’s interests.

Deutsche Bank, Bank of America settle agency bond rigging lawsuits, Reuters, August 17, 2017

Pensions Accuse Morgan Stanley, Goldman Sachs Et Al Of Being Just A Little Too Tight With Each Other, Dealbreaker, August 18, 2017

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