October 04, 2011

BNY Mellon Says New York Attorney General's FX Lawsuit Is Wrong On Facts and Law; Company Will Vigorously Defend Against Baseless Claims

  • Attorney General Deliberately Ignores Key Facts That Both Refute His Allegations and Support BNY Mellon’s Legitimate Business Practices
  • BNY Mellon Executed Transactions Within Fully Disclosed, Daily Guaranteed Pricing Ranges; Decision to Use Company’s FX Services Rested Solely with Institutional Clients and Their Investment Managers Who Could Opt Out on Daily Basis
  • BNY Mellon Standing Instruction Service Offers Institutional Clients and Investment Managers Attractive "Wholesale" Prices Otherwise Unavailable For "Retail" Size Trades
  • Lawsuit Reflects Inappropriate Overreaching into Commercial Relationships

NEW YORK, October 4, 2011 — BNY Mellon today issued the following statement in response to a civil lawsuit filed by the Office of the New York Attorney General.  The lawsuit relates to foreign exchange ("FX") services the company provided to certain institutional clients under its "standing instruction" program.

"The claims in this lawsuit are flat out wrong, both on the law and on the facts.  They reflect a fundamental misunderstanding by the Attorney General and his staff of the role of custodian banks and the operation of institutional FX markets.  We will defend ourselves vigorously on behalf of our shareholders, including many pension funds, and our more than 50,000 employees, 8,700 of whom are based in New York.

"Above all, our client relationships and our integrity are our most valuable assets.  We are always open to resolving issues about our services on a commercial basis with our clients – it is how we remain competitive, because every day we are competing in the marketplace for their business.  

"All of our FX alternatives offer our clients valuable services at a competitive price in a transparent market.  The Attorney General's lawsuit ignores the benefits our standing instruction service provides to our custody clients and their investment managers, who freely choose to use it.  The Attorney General is in essence attacking BNY Mellon for operating a profitable business, suggesting that we should provide our valuable FX services at cost – something no rational commercial institution would do.  

"It is particularly disturbing that the Attorney General deliberately ignores that BNY Mellon acts as principal in standing instruction transactions, which provide real value to our clients. In standing instruction transactions, BNY Mellon buys currencies from and sells currencies to institutional custody clients at 'wholesale' prices that are significantly better than they could obtain from other providers, particularly for transactions of a similar 'retail' size.  Our U.S. trading desks publish a guaranteed range of prices each morning, and clients and investment managers can choose to opt out of the standing instruction program every day if they don't like the range of rates we are guaranteeing.  Our clients and their investment managers have full access to daily reports that detail the prices they received for each transaction, so they are able to compare our pricing to other options in the market and assess the value provided.

"This action is prosecutorial overreach that ill serves New York, New Yorkers and the pension funds whose interests the Attorney General purports to advance. While we recognize that capitulating to the Office's demands might avoid some nasty headlines, we refuse to be coerced into admitting to and paying for wrongdoing that does not exist.

"Importantly, our clients and their investment managers make the decision where and how to execute foreign exchange transactions, not BNY Mellon.  Our clients are smart and sophisticated institutional investors with professional investment managers who are responsible for deciding which of the numerous FX services available from BNY Mellon and other market participants they should use.  If the prices we provided were not competitive, clients and their investment managers would not continue to use our services.

"We are committed to ensuring that clients thoroughly understand our practices and policies, and to continuing to develop new alternatives to meet their foreign exchange needs.  But we do not believe that a subjective determination by the Attorney General about the value and appropriate pricing of BNY Mellon's standing instruction services should be substituted for the considered judgment of the world's most sophisticated investment professionals."  

About BNY Mellon

BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets.  BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team.  It has $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day.  BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).  Additional information is available at www.bnymellon.com and through Twitter @bnymellon.