Bank of New York Mellon is in trouble with the state of Massachusetts right now.
State Treasurer Steven Grossman has estimated that the bank overcharged the state pension fund by about $30 million using trade commissions that were higher than they had to be. Now there will be a lawsuit.
And it’s the not first time BNY Mellon has seen legal action, the firm has pending lawsuits against them in at least five other states, and federal attorneys have filed a suit too.
In the lawsuit, Grossman published internal BNY Mellon e-mails that could detail some of the issues between BNY Mellon and the state.
According to BNY Mellon, in the past few years, clients (not just Massachusetts) started using multi-bank E-commerce platforms, on which they could compare rates in order to get the “best offer,” and buy at the low of the day, decreasing the trade commission they paid BNY Mellon. So if they both had an E-commerce account and an account with BNY Mellon, they might have been able to challenge BNY Mellon’s rates. Ultimately, E-commerce accounts were expensive for BNY.
Clients had the option to leave them and trade on another platform. Of course, in exchange for trading at a lower price, they lost the convenience of having someone else manage their trades for them.
None of this seems that shocking to us, because as David Green of BNY Mellon writes in one of the emails from the lawsuit, “In [one] regard, our execution is very transparent “It’s the high and low of the day, depending on which one is against you.” We have never lied about this, nor should we… The fact that each custodian has different answers and some are dodgy about answering at all only serves to make us look bad.”
But here’s something funny. In the letters, some clients are called “competitive price shoppers.”
And others are called “ultra-friendly.” You can check it out in the letter below. There are red arrows pointing to the specific language.
So was “ultra friendly” the BNY Mellon way of saying, this client will pay no matter what the price? And “competitive price shopper” the way of identifying a client as someone who couldn’t be messed with?
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