The Louisiana Municipal Police Employees Retirement System has filed a class action against J.P. Morgan in NewYork, alleging forex manipulation.
The suit is brought on behalf of a class of all public and private pension funds and any other trust or funds for which J.P. Morgan served as the custodian bank and executed foreign exchange transaction on an indirect basis form 2005.
The class action claims that while serving as the custodian bank for LAMPERs and other member of the class and acting as their agent and fiduciary, J.P. Morgan failed to credit LAMPERS and the class with FX transactions executed at prevailing prices. Instead, J.P. Morgan recorded the FX transactions for its clients at unfavorable rates, and booked for itself the difference between the market rate and the rate assigned to LAMPERS and the Class.
The class action said an analysis of LAMPERS FX transactions executed by J.P. Morgan during the class period demonstrates that 36% of the sampled trades were priced near the absolute worst FX rate during the sample period. Moreover, over 79% of LAMPERS sampled trades were priced at rates that were unfavorable to LAMPERS. In addition, J.P. Morgan booked numerous FX trades for LAMPERS at prices that were lower than the worst possible rate that day. As demonstrated by this analysis, J.P. Morgan systematically overcharged LAMPERS, and profited by retaining for itself the spread between the actual FX rate when a trade was executed and the rate charged to its clients.
The class action says the FX rates charged by J.P. Morgan were not based on the price currencies were trading when a trade was executed but appear to have been arbitrarily selected by the bank after trades were executed and after J.P. Morgan observed post execution movements in the FX market.
The claims of the proposed Class exceed $5 million in aggregate.
J.P. Morgan has provided custodian services to LAMPERS since at least 2005. The bank executes FX transactions on behalf of its clients through three separate programs: AutoFX, Agent FX and Passive Currency Overlay (PCO).
The class action is The Louisiana Municipal Police Employees Retirement System versus J.P. Morgan Case & Co. and J.P. Morgan Chase Bank (ECF Case 12 CV 6659).
(JDC)