Four large banks will pay $499 million to settle a class-action lawsuit levied against them in 2017 by U.S. pension funds over the banks’ alleged attempts to thwart competition in the stock-lending market.
JPMorgan Chase, Goldman Sachs, Morgan Stanley and UBS have agreed to the penalty, and will cooperate in a case against Bank of America, which remains a defendant. Credit Suisse, also a defendant, became the first bank to settle in the case when it agreed last year to pay $81 million.
The class action, led by the Iowa Public Employees’ Retirement System, accused the banks of working together to stall the development of trading systems that matched lenders with stock borrowers, therefore relegating the stock-lending market to "the stone age."
Through trading and clearing service EquiLend, a joint venture the defendants launched in 2002, the banks maintained a monopoly on the market, the suit alleged, and boycotted investors who borrowed from other platforms.
Goldman Sachs, Morgan Stanley, JPMorgan Chase and UBS denied any wrongdoing, according to a filing.
Bank of America and UBS declined to comment to Reuters. Goldman, Morgan Stanley and UBS declined to comment to Bloomberg, and JPMorgan didn’t respond to Bloomberg’s request for comment after business hours.
Combined with Credit Suisse’s payment, the new agreement brings the total of proposed settlements to a “significant sum and places this settlement among the larger antitrust settlements reached in the past decade,” the filing indicated.
EquiLend, which also joined the settlement, agreed to reforms that the plaintiffs expect to “materially decrease the likelihood of future collusion in the stock lending market and ... increase the chances the industry would transition to a more competitive trading environment.”
“By facilitating the ability of the stock lending market to become more competitive and transparent, plaintiffs believe that these reforms generate significant value for both existing class members and future borrowers and lenders in the stock lending market,” plaintiffs said in the filing.
Michael Eisenkraft, a partner at Cohen Milstein who represented the plaintiffs alongside Quinn Emanuel, told the Financial Times his firm is “very pleased to have partially settled this case and had such an impact on how EquiLend operates.
“We are looking forward to continuing to hold Bank of America accountable as the case progresses,” Eisenkraft said.