Northern Trust agreed to pay the $20.9 billion San Francisco City & County Employees' Retirement System $11.7 million in an out-of-court settlement over the firm's securities lending practices, confirmed system spokesman Norm Nickens.
The settlement is independent of other lawsuits involving hundreds of other pensions plans, most of which have been settled, alleging that Northern Trust during the financial crisis placed collateral posted by borrowers of the securities in risky investments such as subprime mortgages. The lawsuits also claimed that Northern Trust charged excessive fees for institutional investors participating in its securities lending programs.
Northern Trust has never admitted wrongdoing but has agreed so far to pay more than $70 million total to various pension plans, shows the firm's third quarter 10-Q filed with the Securities and Exchange Commission.
The settlement between the pension fund and Northern Trust was disclosed in agenda materials at the SFERS board meeting on Nov. 9. The board approved the settlement in closed session at its Oct. 12 meeting.
Papers detailing the San Francisco settlement, which were reviewed by Pensions & Investments, show the pension fund never filed suit against Northern Trust but said through its attorney that it would go ahead with a lawsuit if no settlement was reached.
The settlement papers do not show what losses San Francisco claimed to have incurred from participating in the Northern Trust securities lending program, but says the period covered extends through June 30, 2016.
The settlement states that Northern Trust will not pay the San Francisco retirement system's legal fees.
Jay Huish, the pension fund's executive director, was not immediately available for comment.