A federal judge in Boston has given final approval to a $300 million settlement between State Street Corp. and a class of investors over its foreign exchange practices. This has resulted in other settlements with federal regulators valued at $230 million. The settlement is the largest in the history of Massachusetts’ unfair practices law, Chapter 93A. The settlement would also be the third-largest “nonsecurities class settlement” in the First Circuit Court of Appeals.
The State Street case had been filed before a similar one against the Bank of New York Mellon Corp. Meanwhile, State Street’s separate settlements with the U.S. Department of Labor (DOL), U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice (DOJ) are also set to be resolved with the approval by U.S. District Senior Judge Mark L. Wolf. State Street had insisted on interlocking settlements so its agreements with the federal government would go through only if Judge Wolf signed off on the class settlement.
It was alleged in the private suit that State Street, over the course of a decade, swindled millions of dollars a year from its custody clients on their indirect foreign exchange trades. State Street allegedly misled its clients about the exchange rates that were charged on the trades, and applied hidden markups that had no basis in market rates.
None of the class members – after the settlement got initial approval – objected to or opted out of the settlement. The named Plaintiff, the Arkansas Teacher Retirement System, will receive a $25,000 incentive award, and six other plans will get $10,000 each. Three categories of investors will participate in the settlement. The recovery of the class members will depend on the volume of investments. The categories are:
• Employee Retirement Income Security Act (ERISA) plans;
• mutual funds; and
• a third category of miscellaneous investors.
The Plaintiffs are represented by David J. Goldsmith, Lawrence A. Sucharow and Michael H. Rogers of Labaton Sucharow; Garrett J. Bradley, Michael P. Thornton and Michael A. Lesser of Thornton Law Firm; and Daniel P. Chiplock of Lieff Cabraser Heimann & Bernstein. The case is Arkansas Teacher Retirement System v. State Street Bank & Trust Co. in the U.S. District Court for the District of Massachusetts.
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