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Courts

Puerto Rico government pension group sues GSE bond traders

The Puerto Rico Government Employees and Judiciary Retirement Systems Administration is suing 12 major banks it claims conspired to fix bond prices.

The Puerto Rico Government Employees and Judiciary Retirement Systems Administration filed a proposed class-action lawsuit April 11 against 12 major banks that it claims conspired to fix prices and restrain competition for Fannie Mae, Freddie Mac and other government-sponsored enterprise bonds.

The lawsuit filed in U.S. District Court in New York alleges that beginning in January 2012, the banks had "secretly agreed not to compete," and that part of the conspiracy was a lack of division between primary issuers of the bonds and secondary market traders.

The Puerto Rico Government Employees and Judiciary Retirement Systems Administration purchased $14.9 million in GSE bonds from the 12 banks. The lawsuit claims that bid-offer spreads for GSE bonds "were artificially inflated" from January 2012 until June 2018 and then returned to normal levels once it became known that the defendant banks were being investigated by the Department of Justice for possible manipulation in Fannie Mae and Freddie Mac bonds.

The pension group is proposing to serve as lead plaintiff for a class that could potentially include thousands of other members, the lawsuit said.