State Street has failed in its motion to have Arkansas-based foreign exchange claims against it dismissed. In Boston US District Court judge Mark Wolf on Tuesday denied the motion, which follow claims brought against the bank by the Arkansas Teacher Retirement System. The pension fund claimed the bank had hidden markups on FX trades made on behalf of the pension plan. The bank denied it was in the wrong.
The unsuccessful motion gives way for the fund to proceed with the civil fraud case against Street Bank & Trust.
In the Arkansas fund case, State Street argued that the fund and its managers were sophisticated customers and behaved much like consumers who buy in bulk at large discount warehouses in order to save money.
In a statement regarding Tuesdays outcome, State Street said: We are disappointed in the courts decision and continue to vigorously defend the allegations regarding our indirect FX services made in the civil proceedings commenced against us. We offer clients and their investment managers a range of FX execution options and we believe that our clients and their advisers choose indirect FX as an execution option when it represents the best mix of service and price to address their needs.
Separately, other legal entities, including the U.S. Department of Justice, the U.S. Department of Labor and the U.S. Securities and Exchange Commission are investigating State Streets FX division and have requested information and have subpoenaed the bank in relation to the pricing of FX services.
(JDC)