Bank of America, Four Other Banks, Five Traders Named in SSA Bond Antitrust Action

Law360, FundFire, Policy and Regulatory Report
May 20, 2016

Gregory Asciolla comments on recent scandal involving numerous prominent banks allegedly fixing prices in the $9 trillion SSA bond market

Bank of America, Deutsche Bank, Credit Agricole, Credit Suisse, and Nomura Holdings were recently hit with a proposed investor class action in New York federal court alleging traders working for the banks manipulated trades in the $9 trillion agency bond market.

Boston Retirement System’s antitrust suit is the first nationwide class action alleging traders colluded to fix the prices of supranational, subsovereign and agency bonds between 2005 and 2014, according to plaintiffs firms Labaton Sucharow and Hausfeld. The scheme allegedly caused investors to pay too much when buying the SSA bonds or get too little when selling them.

Gregory Asciolla, Co-Chair of Labaton Sucharow's Antitrust and Competition Litigation Practice, said, "Once again many of the same global banks implicated in numerous other price-fixing conspiracies of complex financial products are up to their same old tricks in the $9 trillion SSA bond market. Similar to allegations in the Libor and foreign exchange antitrust price-fixing cases, the banks [in the instant dispute] agreed to fix prices for SSA bonds by various means, including exchanging confidential customer information, trading habits and order sizes via electronic chat rooms, where traders were able to both hide and police their conspiracy."

Asciolla expects more U.S. public pensions to come forward to join the suit as SSA bonds are a common feature of institutional investors’ fixed income portfolios and because regulatory agencies are investigating the issue. “Two things are certain, we know there’s a U.S. DOJ investigation and they’re looking at chatroom transcripts… and we’re aware at least four individuals have been suspended or terminated or have left their positions of employment [at the banks], suggesting something nefarious,” he said.

Asciolla added that the case is “yet another in a long line of cases alleging price manipulation of financial products by the big dealer banks, this time involving subsovereign, supranational and agency bonds issued by foreign government-related entities. Pension funds were hit hard by this conduct, overpaying for products thought to be safe, low-risk investments. This international scandal to manipulate the prices of complex financial products shows no end.”