Securities Regulation Daily Deutsche Bank, Bank of America settle bond rigging suit for $65 million
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Friday, August 18, 2017

Deutsche Bank, Bank of America settle bond rigging suit for $65 million

By Lene Powell, J.D.

Several Deutsche Bank and Bank of America entities agreed to pay over $65 million to settle consolidated actions alleging that a group of major banks colluded to manipulate the market for U.S. dollar-denominated SSA bonds to the detriment of investors. The settlement is preliminary and requires court approval (In re SSA Bonds Antitrust Litigation, August 17, 2017).

The settling defendants include Bank of America Corporation, Bank of America, N.A., Merrill Lynch International, Bank of America Merrill Lynch International Limited, and Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, "Bank of America") and Deutsche Bank AG and Deutsche Bank Securities Inc. (collectively, "Deutsche Bank").

SSA bond rigging. The defendants are traders and banks that act as market makers for U.S. dollar-denominated sub-sovereign, supranational, and agency (SSA) bonds. As the settlement memorandum explains, SSA bonds are bonds issued by certain large, multilateral institutions that often have global economic mandates (supranational bond issuers), sovereign and sub-sovereign government entities (sovereign bond issuers), as well as subdivisions of sovereign states and certain institutions that perform tasks on behalf of a governing sovereign ("agency bond issuers").

The plaintiffs brought federal antitrust claims and state law claims against the defendants, alleged that the banks colluded and often secretly functioned as a unitary "super-desk" that greatly diminished overall competition in the market, allowing them to exert influence over the SSA bond market that would be impossible if acting independently. According to the plaintiffs, the defendants undermined competition by engaging in numerous anticompetitive activities, including (a) fixing bond prices offered to investors; (b) strategically coordinating bids to avoid competing with one another; and (c) colluding to share sensitive competitive information with each other. The conspiracy was documented in hundreds of electronic chat transcripts covering over 300 trading days between 2005 and 2015.

Settlement. The settlement class includes persons or entities who entered into SSA bond transactions with the defendants or related entities between January 1, 2005 and the date of the preliminary approval order.

The agreement provides for Bank of America to pay $17,000,000 and Deutsche Bank to pay $48,500,000 as settlement compensation to members of the proposed class. The settling defendants also agreed to provide substantial evidence, including hundreds of electronic chats among the alleged conspirators, which the plaintiffs believe they can use against the remaining defendants.

The plaintiffs have not yet submitted a notice plan. They are seeking and the settling defendants are preparing to produce data and counterparty lists to notify class members and to help develop a plan for distributing settlement proceeds to qualified claimants. The plaintiffs noted that similar two-step preliminary approval processes have been adopted in several recent class action settlements.

The case is No. 1:16-cv-03711-ER.

Attorneys: Garrett J. Bradley (Thornton Law) for Boston Retirement System. Adam Selim Hakki (Shearman & Sterling) for Bank of America, N.A. and Bank of America Merrill Lynch International Ltd. Lisa Jean Fried (Hogan Lovells) for Credit Agricole Corporate and Investment Bank. Adam Shawn Mintz (Cahill Gordon & Reindel LLP) for Credit Suisse AG. John Terzaken (Allen & Overy LLP) for Deutsche Bank AG. John D. Buretta (Cravath, Swaine & Moore LLP) for Nomura International PLC.

Companies: Bank of America, N.A.; Bank of America Merrill Lynch International Ltd.; Credit Agricole Corporate and Investment Bank; Deutsche Bank AG; Nomura International PLC

MainStory: TopStory FinancialIntermediaries FraudManipulation NewYorkNews

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