A class action involving State Streets securities lending business is set to go to trial in a Boston federal court.
Under the Employee Retirement Income Security Act (ERISA), two US-based plans, those of Goodyear tyres and glass manufacturer Glass Dimensions are alleging a breach of fiduciary duty based on self-dealing and unreasonable compensation for securities lending services. Specifically, they allege the custodial lender chose itself to run the lending program instead of putting it out to competitive tender. It also accuses State Street of excessive profiteering.
A report in the Financial Times, which initially covered the story, said State Street is counter arguing that the suit’s 2010 filing missed Employee Retirement Income Security Acts statute of limitations deadline and maintains it was not a fiduciary with respect to its securities lending fee. The report adds State Street is also challenging Glass Dimensions’ evidence of breach of fiduciary trust and damages, and is arguing that its securities lending activity was exempt from liability under the Department of Labor’s Prohibited Transaction Exemption.
Responding to the allegations, State Street said: We believe these cases are without merit and continue to vigorously defend ourselves against these allegations.
A court clerk said she expects a date for the trail will be chosen on April 1.
(JDC)