Big Banks’ $500 Million Settlement Puts Wall Street on Notice – Bloomberg Law

• Plaintiffs alleged collusion among six large investment banks
• Settlement puts pressure on banks to comply with antitrust law

A nearly $500 million settlement agreement by four investment banks over control of the stock-loan market is prompting changes to bank practices and warning the industry to take antitrust violations more seriously, analysts said.

Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co., and UBS Group AG last week said they agreed to settle claims in a case brought by pension funds led by the Iowa Public Employees’ Retirement System. The funds in 2017 filed suit, accusing the Wall Street giants of conspiring to thwart all-electronic trading systems that match stock lenders and borrowers in an effort to preserve the banks’ privileged role as a broker on every stock loan trade.

The settlement also pressures the lone holdout in the case, Bank of America Corp.; the funds are pursuing class action status that would add more plaintiff investors. Bank of America declined to comment for this story.

The banks relied on EquiLend, a joint-venture trading and clearing platform owned by the banks. As part of the settlement, EquiLend agreed to changes designed to diminish collusion, such as adhering to an antitrust code of conduct and agreeing to a reporting mechanism. The market for stock loans is seen as particularly opaque, and therefore prone to anticompetitive behavior.

“This is a really big win for the little guys,” said Julie Goldsmith Reiser, a partner at Cohen Milstein Sellers & Toll PLLC. Her firm is co-lead counsel for the plaintiffs along with Quinn Emanuel Urquhart & Sullivan, LLP. “This kind of pressure from public pension funds, who are acting on behalf of regular everyday people, can influence how the markets work.”

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Push to Class Action

The plaintiffs will continue pursuing class certification for the settlement so that thousands of similarly situated investors are able to pursue their claims in one litigation.

A magistrate judge has already recommended class action but it still must be formally certified, Reiser, of Cohen Milstein, said.

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