Scott Pruitt, Oklahoma attorney general, has become the latest US state legislative chief to accuse custody banks of failing to give clients best execution when trading FX on behalf of pension funds. Pruitt is investigating the claims for his state’s seven pension systems, which together manage assets of $21.4 billion. Pruitt states the investigation could result in criminal charges and civil litigation. He is aiming to recover more than $200 million for state pension funds.
The claims focus on the time of day when FX transactions have taken place. They centre on discrepancies between the time of day the currency transactions are made and the trade price that is charged to the fund.
Previously, state treasurers and attorneys general from California, Florida, North Carolina and Virginia have voiced similar concerns on behalf of public pension funds. Calpers, the California state pension fund, has been one of the most litigious custodian clients. It sued State Street, the largest US custody bank, in 2009.
BNY Mellon too is facing a number of lawsuits from US states and individual companies. In 2009, Delaware firm FX Analytics launched a lawsuit in Virginia, claiming that BNY Mellon had used false reporting to mark up or down trade prices since at least 2000.
State Street and BNY Mellon both deny any wrongdoing.
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