Florida State Board of Administration, Tallahassee, will be paid $28 million by Bank of New York Mellon, global master custodian for a state pension fund, to settle a lawsuit that claimed BNY Mellon overcharged for foreign-exchange transactions, Florida Attorney General Pam Bondi said in a news release.
The settlement will fully compensate the state for past forex trades made by BNY Mellon and will require complete transparency on the pricing of future trades, according to the settlement.
The settlement resolves allegations involving investments made through BNY Mellon's securities lending program on behalf of the $137.9 billion Florida Retirement System in medium-term notes issued by Sigma Finance, which “defaulted on certain notes in late September 2008 and subsequently went into receivership,” according to a news release on the attorney general's website.
Along with the $28 million settlement, BNY Mellon will deduct $500,000 annually from its custodian fees charged to the FSBA through the 2022-2023 contract year.
BNY Mellon admitted no wrongdoing, according to the settlement.
“We're gratified that the Florida attorney general is withdrawing the lawsuit and that we've resolved the issues related to the Florida State Board of Administration's securities lending program,” said Kevin Heine, spokesman for BNY Mellon, adding that the settlement “allows us to continue our long-standing relationship” with the FSBA.
The original lawsuit was filed in Leon County Circuit Court in Tallahassee by a whistle-blower in 2009 and was joined by Ms. Bondi in 2011. Despite the lawsuit, BNY Mellon on Oct. 1 was retained as the FSBA's global master custodian for its $166.8 billion in assets.