Class Action Against BNY Mellon’s Trust Investing Practices To Go Forward

In a decision handed down today, Patti B. Saris, the chief judge of the U.S. District Court, District of Massachusetts, ruled that Ashby Henderson’s class-action lawsuit against the Bank of New York Mellon could go forward. Ms. Henderson alleges that BNY Mellon invested her private trust assets, and those of thousands of trust beneficiaries nationwide, almost exclusively in proprietary financial products that benefited the bank more than the beneficiaries. Ms. Henderson alleged that the self-serving investments included, for example, the BNY Mellon Municipal Opportunities Fund, managed by BNY Mellon fund advisors; a Dreyfus fund managed by a BNY Mellon subsidiary; and an emerging markets fund managed by a company with a long-standing relationship with BNY Mellon. Judge Saris recounted Ms. Henderson’s claim that “these investment decisions were motivated by BNY Mellon’s own financial benefit rather than the best interests of the trust beneficiaries.”

Ms. Henderson claimed that BNY Mellon had a conflict of interest when it invested in its own proprietary funds even if there were non-affiliated funds that performed better or cost less. Some of the BNY Mellon investments she objected to were given ranks of only one or two stars out of five by MorningStar, the well-respected fund rating company. As the trust beneficiaries had no say so in where the funds were invested, Ms. Henderson alleges that they were injured by the imprudent investing policies BNY Mellon, and had no recourse other than to file a lawsuit. She claimed that in contrast to the poorly performing funds BNY Mellon invested in for its fiduciaries, the trust beneficiaries, it approved non-proprietary investments for its brokerage customers, who can veto its investment decisions and will remove their money if satisfied with BNY’s investment choices or performance.

BNY Mellon had moved to dismiss Ms. Henderson’s class action lawsuit, arguing that her claims were preempted by federal law, the Securities Litigation Uniform Standards Act. But Judge Saris found that Ms. Henderson’s claims, founded upon BNY Mellon’s alleged breach of its fiduciary duty to the trust beneficiaries, were not covered by the federal law. The case now proceeds to the discovery phase, where Ms. Henderson seeks from BNY Mellon a full explanation, with documentary substantiation, of the details of, and reasons why it made the investment decisions she challenges.

Ms. Henderson is represented by John Roddy and Greg Porter of Bailey & Glasser’s Boston and Washington DC offices, respectively, Derek Howard, of the Howard Law Firm, Brian McTigue, of McTigue Law, and Aron Liang, of Minami Tamaki. The case is Henderson v. The BNY Mellon, N.A., et al., United States District Court, District of Massachusetts, Case No. 15010599-PBS.

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