Bank of New York Mellon Corp. reached a series of settlement agreements with the Department of Justice, New York Attorney General, Department of Labor, Securities and Exchange Commission and private customer class actions regarding the custodial bank's foreign-exchange practices.
BNY Mellon agreed to pay a total of $714 million to resolve the matters, subject to required approvals. The total settlement amount is fully covered by pre-existing legal reserves. The Justice Department and New York attorney general's office will each receive $167.5 million.
The Labor Department will receive $14 million and the SEC, with which the company has reached a settlement in principle, will receive $30 million. The company has agreed to pay $335 million to settle the customer class-action litigation.
In lawsuits filed in 2011, federal and state officials alleged that BNY Mellon misled investors about FX deals by promising it would provide the best rates available when executing trades. Instead, the bank obtained the best rates for itself and gave less favorable terms to customers and kept the difference for itself.
In addition to the financial terms of the settlement, BNY Mellon has admitted the factual details of its fraud and has agreed to end the employment of certain executives involved in the fraud, reform its practices to improve and increase the information it provides to its customers, and waive the deductibility of New York state and local taxes with respect to the New York state portion of the settlement.
Two Columbus, Ohio-based pension funds — the $14.7 billion Ohio Police & Fire Pension Fund and $12.6 billion Ohio School Employees Retirement System — stand to recover a total of about $5 million as a result of a class-action lawsuit regarding BNY Mellon's FX practices.
BNY Mellon issued the following statement in an e-mail: “We are pleased to put these legacy FX matters behind us, which is in the best interest of our company and our constituents. We continue to improve our product offerings to ensure they are meeting client demand.”