2023-08-23 22:14:13
(Adds banks denying wrongdoing, deal details, market size and case citation) by Jonathan Stempel
NEW YORK, Aug 23 (Archyde.com) – Goldman Sachs GS.N, JPMorgan Chase JPM.N, Morgan Stanley MS.N and UBS UBSG.S have agreed to pay $499 million to settle a competing lawsuit brought by investors who accused of conspiring to stifle competition in the stock loan market.
The deal was disclosed Wednesday in a document filed in Manhattan federal court.
It requires a judge’s approval and also mandates changes to the governance of EquiLend, a joint venture between the defendants.
Led by four pension funds and a trading firm, the plaintiffs accuse the banks (link) of having conspired since 2009 to relegate the stock lending market to the “stone age” by boycotting the platforms of startup.
They claim the banks used their positions on EquiLend’s board to maintain monopoly control over the market and charge excessive fees to investors.
Investors have now secured $580 million in settlements with five banks, including an $81 million deal (link) in February 2022 with Credit Suisse, which UBS bought in June.
The banks denied wrongdoing, but reached an agreement to avoid the risk, cost and inconvenience of further litigation, according to court documents.
They also agreed to cooperate in the lawsuit brought by the investors against the last defendant, Bank of America BAC.N. The trial began at (link) in August 2017.
Spokespersons for Bank of America and UBS declined to comment. The other banks did not immediately respond to requests for comment.
The US Treasury Department’s Financial Stability Supervisory Board estimated (link) that $3.1 trillion in securities were on loan worldwide as of September 2021.
Changes to EquiLend’s governance include new restrictions on how board members share information and limit the number of seats each bank can hold on the board.
They also provide that the external competition lawyers on the board of directors are “rotated” every three years, in order to avoid what investors call the “hoarding” of these lawyers.
The case is: Iowa Public Employees’ Retirement System et al v Bank of America Corp et al, US District Court, Southern District of New York, No. 17-06221.
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