JPMorgan, Goldman Sachs, UBS, and Morgan Stanley are gearing up to pay $499 million to resolve a class-action lawsuit. Initiated in 2017 by US pension funds, led by the Iowa Public Employees’ Retirement System, the suit accuses these financial behemoths of attempting to stifle competition in the stock-lending market.
The pension funds allege that the banks aimed to monopolize the market with their system, EquiLend. Moreover, they claim the banks actively hindered the development of new platforms for the borrowing and lending of electronic securities. Established in 2001 by a consortium of big names, including Barclays Global Investors and Lehman Brothers, EquiLend is now under the ownership of Bank of America.
Significantly, Credit Suisse has already forked over an $81 million fine to put its portion of the lawsuit to rest. Consequently, Bank of America remains the sole remaining defendant yet to settle. However, none of the implicated banks have commented on the case, maintaining a conspicuous silence.
EquiLend, for its part, has denied any wrongdoing. Representatives have stated that the settlement was reached primarily to maintain day-to-day business operations for its clients, reports the Financial Times.
According to court documents, the plaintiffs have high hopes that this settlement will serve as a deterrent against similar alleged anti-competitive maneuvers. While the defendants have vehemently denied any wrongdoing or necessity for reforms, the plaintiffs believe otherwise. They think the settlement will realign EquiLend with best practices and anti-cartel guidelines among competitors.
Hence, plaintiffs are optimistic that these reforms will materially reduce the likelihood of future collaboration in the stock-lending market. Additionally, these changes will pave the way for the industry to transition to a more competitive trading environment.
The case marks a significant milestone in the ever-evolving landscape of financial markets. Besides exposing alleged anti-competitive practices, it has also highlighted the power of collective action led by pension funds. Legal experts suggest that this may pave the way for future litigations targeting similar practices in other financial markets, serving as a wake-up call for industry players to embrace fair competition.