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Pension funds sue 6 investment banks over securities lending market collusion

Three public pension funds claim in a federal class-action lawsuit filed Thursday that six major investment banks colluded to overcharge investors and maintain control of the $1.72 trillion stock loan market, according to a court document.

The suit was filed in U.S. District Court in New York by the $28.5 billion Iowa Public Employees' Retirement System, Des Moines; $14.2 billion Orange County Employees Retirement System, Santa Ana; and $2.5 billion Sonoma County Employees' Retirement Association, Santa Rosa, Calif.

The suit accuses Bank of America, Credit Suisse, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley (MS) and UBS of violating antitrust law by conspiring to overcharge investors and obstructing efforts to create competitive electronic exchanges, according to the documents.

The banks colluded to block the development of competitive exchange platforms and the impact of government regulatory reforms, according to the lawsuit. The suit claims the banks have conspired since 2009 through EquiLend, a securities lending platform the banks created, to prevent access to other marketplaces to obtain better prices on stock lending.

The pension funds seek unspecified treble damages and an order to force the banks to stop the alleged collusion.

The law firms of Cohen Milstein Sellers & Toll and Quinn Emanuel Urquhart & Sullivan represent the pension funds.

Spokesmen for Credit Suisse, Morgan Stanley and J.P. Morgan said their firms would not comment. Officials at the other investment banks and EquiLend could not be immediately reached for comment.