Four banking giants are preparing to pay nearly half a billion dollars to settle a class action lawsuit brought against them for allegedly attempting to thwart competition in the stock-lending market.
JPMorgan, Goldman Sachs, UBS and Morgan Stanley have agreed to collectively pay $499 million to end the suit, which was filed in 2017 by US pension funds, led by the Iowa Public Employees’ Retirement System.
The pension funds accuse the banks of trying to corner the market with their own system called EquiLend, while hindering the development of new platforms that would execute the borrowing and lending of electronic securities.
EquiLend was set up in 2001 by Barclays Global Investors, Bear Stearns, Goldman Sachs, JPMorganChase, Lehman Brothers, Merrill Lynch, Morgan Stanley, Northern Trust, State Street, and UBS Warburg, and is now owned by Bank of America.
Credit Suisse already paid an $81 million fine to settle its end of the lawsuit, and Bank of America is now the last remaining defendant who has not settled.
None of the banks have issued a statement on the case, and EquiLend has denied any wrongdoing, with representatives stating it reached a settlement in order to maintain day-to-day business operations for its clients, reports Financial Times.
According to court documents, the plaintiffs hope the settlement will prevent similar alleged anti-competitive practices in the future.
“While Defendants have denied any wrongdoing and that any reforms were necessary, Plaintiffs believe that the equitable relief they designed and negotiated for will help align EquiLend to the best practices and guidelines for anti-cartel and collaborations among competitors.
Plaintiffs believe the reforms should materially decrease the likelihood of future collusion in the stock lending market, and thus Plaintiffs believe the reforms thereby increase the chances the industry would transition to a more competitive trading environment.”