US/NETHERLANDS - Dutch pension fund Stichting Pensioenfonds Medewerkers Apotheken (PMA) has filed a federal court lawsuit against State Street Bank and Trust alleging breach of fiduciary duties and securities fraud following losses in a 120/20 fund.
Lurie & Krupp attorney David Lurie said: "State Street mismanaged the State street Global Advisors (SSgA) Europe Index Plus Edge Common Trust Fund by transferring ownership of substantially all of the fund's securities to Lehman Brothers, which were commingled with Lehman's assets, re-transferred to third parties, and ultimately lost when Lehman failed. State Street failed to disclose this huge risk to potential investors, including PMA."
In December, the law firm brought similar charges against the firm's SSgA World Index Plus Edge Common Trust Fund, a 130/30 fund, on behalf of the Dutch pension fund Stichting Pensioenfonds British American Tobacco. (Global Pensions; December 18, 2009)
The law firm said State Street entered into contracts with Lehman Brothers as prime broker that allowed title to all of the Europe Edge Fund's securities to be transferred to Lehman Brothers and its European affiliate.
When Lehman Brothers became insolvent in September 2008, the securities became part of the Lehman Brothers' bankruptcy estate and none were returned to the Europe Edge Fund. Consequently, PMA lost substantially all of its US$76m investment, the law firm said.
It added State Street told PMA that it held legal title to the securities as trustee of a common trust fund and that the securities would not be at risk if State Street filed for bankruptcy.
However, State Street nevertheless transferred legal title to Lehman Brothers, failed to tell PMA about the transfer, and omitted to disclose that the Europe Edge Fund had huge unsecured credit risk with Lehman Brothers, the law firm alleged.
SSgA spokeswoman Arlene Roberts said: "Certain funds managed by SSgA used Lehman Brothers International Europe as prime broker. We believe the appointment of LBIE as prime broker was appropriate and we are working aggressively with bankruptcy and litigation counsel in the UK and US to recover the assets which have been frozen due to LBIE's insolvency."
More needs to be done to speed up DB to DC transfers but, as Jonathan Stapleton says, more also needs to be done to protect members.
The Pensions Ombudsman (TPO) took on 2,566 early resolution cases in 2018/19 after onboarding a team from The Pensions Advisory Service (TPAS), according to its annual report and accounts.
The lifeboat fund is in a good position despite reserves taking a £0.6bn hit. But the ramifications of the EU judgment on member compensation is an area of concern for CEO Oliver Morley, writes Stephanie Baxter