BNY Mellon Discretionary Investments Violated Agreements Class Action

BNY Mellon, NA is a subsidiary of the Bank of New York Mellon Corporation which has a wealth management division. Customers for this division may entrust funds to the bank and rely on the bank “to invest those funds at the Bank’s prudent discretion.” The bank has full investment authority over those funds. However, the complaint for this class action alleges that the bank did not meet its fiduciary duties to those customers.

The class for this action is all persons or entities (a) over whose assets BNY Mellon had investment discretion with an investment advisory or similar agreement, and (b) whose assets BNY Mellon used its authority to put into investment options financially affiliated with BNY Mellon or BNY Corporation.

The complaint quotes the bank’s website as saying, “Under the fiduciary standard, financial advisors have a legal obligation to put the best interest of the client ahead of their own when making investment recommendations.” This includes “choosing the investments that best align with the client’s objectives, and sharing all critical information with the client.” The bank also makes a promise: “Advisors under the fiduciary standard do not profit based on the investments that are recommended for a client’s portfolio.”

However, the complaint alleges that the bank does not fulfill these fiduciary duties—that it does not put its clients’ interests first, choose investments that fit clients’ objectives, or invest clients’ funds prudently.

On the contrary, the complaint claims that BNY Mellon bought “underperforming investment vehicles” (a) in which it or its parent company had financial interests, (b) from which it or its investment managers received commissions, fees, or other payments, (c)from which BNY Mellon Corporation and affiliates earned fees and other payments, and (d) that repeatedly underperformed the market.

The complaint sums up these investments as “conflicted, self-dealing transactions” and alleges that the bank did not have “proper authorization” for them.

Outlined in the complaint are a number of ways in which BNY Mellon breached its fiduciary duties or violated its agreements with clients.

For example, the complaint says, the bank companies “promised its clients that BNY Mellon would not use its discretionary authority to purchase securities issued by BNY Corp. or its affiliates at all”—but then did exactly that. Furthermore, ignoring this blanket prohibition, the companies “specified a list of affiliated funds that BNY Mellon was purportedly authorized to purchase” in IRA accounts, and then “purchased affiliated funds that were not on the pre-authorization list.”

Article Type: Lawsuit
Topic: Investments
Tags: Breach of Fiduciary Duty, Discretionary Trading in Account, Investments, Your Bank