BNY Mellon has been a custodian since 1999 for the Massachusetts pension fund, which has about $50 billion in assets. Many of the investment firms that buy stocks, bonds, and other securities for the fund use BNY Mellon to exchange currency in particular markets where they are investing.
Jon Carlisle, spokesman for pension fund chairman and state Treasurer Steve Grossman, said the fund staff has been looking into foreign exchange pricing over the past 18 months, “given the concerns that have been raised on this front.’’ The state expects to get the result of its inquiry by next month.
The arcane world of foreign-currency trading was thrust into the public eye in fall 2009. Court documents released then revealed that the California attorney general had sued State Street on behalf of two giant pension funds, including the California Public Employees’ Retirement System, or CalPERS. The state alleged that the company had overcharged the funds $56 million over eight years for foreign exchange trades. California is seeking more than $200 million in damages and penalties.
Secretary of State William F. Galvin also is examining State Street’s foreign exchange trading. Meanwhile, the City of Boston and several other cities and towns have brought whistle-blower cases against BNY Mellon and State Street. Attorneys general in Florida and Virginia are also looking into allegations that BNY Mellon overcharged pension funds on foreign exchange.
State Street and Mellon have denied wrongdoing. State Street said it is cooperating with regulators, including at the Securities and Exchange Commission. Mellon declined to comment on the SEC inquiry.
With regard to the California complaint and a similar suit brought by an Arkansas pension fund, State Street said in a statement: “We intend to vigorously defend the allegations made recently by an Arkansas fund and the California claims concerning our FX business. We stand by our business practices.’’
