Court Moves Forward Suit over State Street FX Practices

August 8, 2011 (PLANSPONSOR.com) – A federal court has moved forward claims by investors in State Street stock, including retirement plan participants, relating to its foreign exchange practices.

The U.S. District Court for the District of Massachusetts rejected State Street’s argument that it should follow the lead of the 3rd U.S. Circuit Court of Appeals in Moench v. Robertson and adopt the presumption that State Street company stock was a prudent investment in its employee retirement plan. The court agreed with plaintiffs that the Moench presumption does not apply, and, even if it did, they have provided sufficient allegations of imprudence to rebut the presumption.   

The court found that State Street did not face the same pressure as fiduciaries in the Moench case because they were not required to offer a company stock fund, but instead could have removed it from the list of available plan investments. U.S. District Judge Nancy Gertner said it is not appropriate to apply a presumption that may not be necessary in this case to further Congress’ goal of encouraging Employee Stock Ownership Plans (ESOPs).  

“Without the Moench presumption shielding defendants, plaintiffs have sufficiently alleged that State Street stock was not a prudent investment for the plan,” the opinion stated. “The allegations support a plausible claim that the objective, prudent person who knew what defendants knew would have ceased to invest in State Street stock before October 2009.”