A federal judge from the Middle District Court of Tennessee dismissed the case brought by two pension funds against BlackRock iShares for providing what the plaintiffs called “excessive compensation” to securities lending agents.
The plaintiffs, Laborers’ Local 265 Pension Fund from Cincinnati and Plumbers and Pipefitters Local No. 572 Pension Fund from Nashville, sought monetary damages and attempted to ban BlackRock from securities lending, due to iShares returning 60% of the revenues generated from securities lending and providing the rest to Blackrock subsidiaries that acted as the agent lenders, the court documents said. The pension funds contended that this revenue split violated several sections of the Investment Company Act of 1940.
However, BlackRock asked for a dismissal, saying that the pension funds’ claims did not apply under the 1940 Act. In particular, BlackRock had previously received an SEC exemption from the portion of the ‘40 Act that prohibits the type of relationship that iShares employed, using its own affiliates as agent lenders.
The court agreed with BlackRock, and the case was dismissed for failing to state a claim. The pension funds have until Sept. 17, 2013 to amend their complaint if they so choose.
BlackRock Wins Dismissal in Securities Lending Case
A federal judge from the Middle District Court of Tennessee dismissed the case brought by two pension funds against BlackRock iShares for providing what the plaintiffs called “excessive compensation” to securities lending agents.