Bank Securities Lending Settlement For $150 Million

The past few years have seen a number of class claims brought against banks in connection with securities lending programs (reported in the June 2009 ERISA Litigation Update).

One of these cases settled earlier this month, when a bank agreed to pay $150 million to resolve a certified class action alleging breach of ERISA fiduciary duties in connection with the bank's securities lending program. The case is a consolidation of claims asserted on behalf of all plans and entities for which the bank invested cash collateral directly or indirectly in one or more debt securities issued by Sigma Finance, Inc. ("Sigma"), a structured investment vehicle.

Securities lending involves the loan of a security by its owner to a borrower who uses the security for short-term purposes. In this case, the plaintiffs alleged that the bank had a practice of lending securities held by the plans and using the cash collateral to invest in notes and other debt securities issued by Sigma,