Compliance May 6, 2009

Pension Fund SecLending Suits Consolidated

May 5, 2009 (PLANSPONSOR.com) - A federal judge in New York has joined two fiduciary breach lawsuits by pension plans against JPMorgan Chase Bank that both allege wrongdoing in the bank's securities lending program.
Reported by

U.S. District Judge Shira A. Scheindlin of the U.S. District for the Southern District of New York said in an order that the two pension fund cases raised similar issues about the bank’s securities lending practices and that they would move forward as one matter.

The two proposed class actions include:

  • A January suit by the Board of Trustees of the American Federation of Television and Radio Artists Retirement Fund (see  JP Morgan Hit with SecLending Lawsuit ).
  • A March suit filed by the Board of Trustees of the Imperial County (California) Employees’ Retirement System.

According to the suits, JPMorgan invested and lost a substantial portion of the securities lending cash collateral provided to potential class members in medium-term notes (MTNs) by Sigma Finance, a Delaware corporation organized for the sole purpose of issuing debt securities for its Cayman Islands parent company.

The pension funds said Sigma Financial’s creditors seized over $25 billion of its approximately $27 billion of assets in late September and early October 2008, leaving Sigma Financial with just under $2 billion as security for approximately $6.2 billion of outstanding MTNs and other secured debt.

Sigma Financial was placed into receivership in early October 2008.

The AFTRA case is Board of Trustees of the AFTRA Retirement Fund v. JPMorgan Chase Bank N.A., SDNY, No. 09-cv-00686.

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