Northern Trust has set aside $19.2 million in pre-tax money to resolve certain class-action lawsuits related to securities lending losses.
The custodian says it has reached tentative agreements to settle cases where clients who invested in certain Northern Trust funds experienced securities lending losses during the financial crisis. However, the settlements are not final and are pending court approval.
In one case, Diebold v. Northern Trust, court approval would fully settle the case, though the exact amount of the $19.2 million that would be used has not been disclosed. The case is a class action suit brought primarily on behalf of an ExxonMobil retirement plan that alleges that Northern Trust violated the Employee Retirement Income Security Act (ERISA) by engaging in imprudent practices, such as reinvesting collateral in pools that were “illiquid, highly-leveraged, and unduly risky,” the complaint says.
The other settlement, Louisiana Firefighters v. Northern Trust, involves a similar case on behalf of several pension plans, but this case will only be partially settled, pending court approval. On the one hand, Northern Trust will settle claims related to investments in Northern Trust common and collective funds that were engaged in securities lending, but the custodian is not settling claims for losses with funds lending their own portfolios.
As for other pending cases stemming from the financial crisis, Northern Trust says, “We intend to vigorously defend the remaining securities lending cases.”
Northern Trust Sets Aside $19.2 Million for Securities Lending Lawsuits
Northern Trust has set aside $19.2 million in pre-tax money to resolve certain class-action lawsuits related to securities lending losses.