There is no guarantee that BNY Mellon and the U.S. Attorney’s office can reach a settlement agreement concerning allegations the bank overcharged clients for foreign exchange trades, according to a person familiar with the case. Recent reports of settlement talks have been exaggerated, this person said.
“It’s not that big a deal at all,” said the source referring to reports suggesting the two sides are close to settling part of a lawsuit filed back in October . The suit seeks the return of hundreds of millions of dollars for BNY Mellon’s alleged overcharges.
The reports of the two sides moving close to a settlement stem from a filing Monday asking for a one week extension of a January 9 deadline the bank faced in responding to the government’s complaint. The filing said the parties are close to reaching an agreement resolving certain claims.
The source said the claims being discussed are not monetary, but procedural in nature and there is no guarantee a settlement on these matters will be reached. Both sides are working toward an agreement on how pricing for currency trades would be disclosed to customers, specifically how “standing instruction” services would be priced.
The government accused BNY Mellon of failing to provide promised “best execution” when trading currencies for certain clients who allowed the bank to execute the trades for them under “standing instructions”.
These trades are basically pre-approved by the client and done at the discretion of BNY Mellon within a certain price range that changes daily. Federal prosecutors say BNY Mellon consistently gave their clients the worst price of the day, while allegedly executing the trades at a lower price and pocketing the difference.
BNY Mellon countered clients see the price range for “standing instruction” trades every day and can always opt out of them if they do not approve of the range.
BNY Mellon has also been sued by the state attorneys general of New York, Delaware and Florida for similar practices. New York Attorney General Eric Schneiderman is suing the bank for $2 billion dollars over the alleged overcharging. The source said the talks with the Department of Justice have no connection to these other suits.
BNY Mellon declined to comment. Calls to the U.S. Attorney’s office were not returned.
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