NEW YORK and PITTSBURGH – The Bank of New York Mellon Corporation (“BNY Corp.”) and its wholly-owned subsidiary, the Bank of New York Mellon Corporation (“BNY Mellon”), committed, or aided and abetted, multiple breaches of fiduciary duties and client agreements by directing millions of dollars of their wealth management clients’ funds into conflicted, underperforming investment vehicles, prioritizing their own financial interests over those of these clients, according to a class action lawsuit filed today in Pennsylvania federal court. The lawsuit seeks to recover hundreds of millions of dollars in advisory and investment management fees that the plaintiffs and other class members paid to BNY Mellon while it acted as an unfaithful fiduciary, as well as all other damages authorized by law.
The complaint alleges that clients of BNY Mellon’s wealth management division collectively deposited millions of dollars in their respective accounts and vested BNY Mellon with full investment authority over those funds. BNY Mellon and BNY Corp. promised that BNY Mellon would act as a fiduciary for its wealth management clients and represented that “[u]nder the fiduciary standard, financial advisors have a legal obligation to put the best interests of the client ahead of their own when making investment recommendations…[This] means choosing the investments that best align with the client’s objectives… Advisors under the fiduciary standard do not profit based on the investments that are recommended for a client’s portfolio.”
In truth, however, BNY Mellon allegedly used client assets to purchase investment vehicles in which BNY Mellon and BNY Corp. had financial interests, preferring those self-dealing investments even when unaffiliated, better funds were available, and, together with BNY Corp., received unauthorized and undisclosed commissions, fees, or other improper compensation.
DiCello Levitt partner, Bruce Bernstein, plaintiffs’ co-lead counsel in the case, stated that: “[w]e believe that BNY Mellon cost its wealth management division clients hundreds of millions of dollars by breaching its fiduciary duties, breaching the terms of its client agreements, and engaging in deceptive trade practices to line its own pockets and enrich its affiliates at its clients’ expense.” He expanded on that by stating: “while the complaint alleges that there were lower fees, better-performing investment options available in all investment categories, BNY Mellon instead chose its own interests over those of its supposedly highly-valued clients. Such behavior cannot be permitted to stand, and we will use every legal remedy available to hold it responsible and, on behalf of plaintiffs and other class members, recover all available damages under the law.”
The grant of full discretionary authority to investment advisors is common practice—safeguarded by fiduciary standards and contract clauses that prohibit the advisors from engaging in undisclosed, conflicting transactions, such as purchasing investments that are either affiliated with the advisors or in which they hold a financial interest.
“By granting BNY Mellon full discretionary authority, our clients placed a significant amount of trust in the bank and its investment professionals,” added Josh Gunnemann, a partner at Councill & Gunnemann LLC and plaintiffs’ co-lead counsel. “Unfortunately, BNY Mellon broke that trust and breached its fiduciary duties through self-dealing.”
The case is Walden v. The Bank of New York Mellon Corporation and BNY Mellon, N.A., Case No. 2:20-cv-01972-CRE. in the United States District Court for the Western District of Pennsylvania. A copy of the complaint is available here.
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About Councill & Gunnemann
Founded in 2020 by two experienced trial lawyers, Councill & Gunnemann represents individuals and businesses in complex litigation and regulatory matters across the country. With over twenty-five years of securities litigation, trial, and regulatory experience, Councill & Gunnemann represents clients in complex litigation, FINRA arbitrations, SEC administrative proceedings, and jury trials in federal and state court.