First Blood for Northern Trust in Diebold Case
04 October 2010 Chicago
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Northern Trust has part-won a ruling on a motion to dismiss ERISA breach of fiduciary duty and prohibited transaction claims involving an investment manager's securities lending programme.
The motion formed part of the case of Diebold et al v Northern Trust, which is ongoing in Illinois. A lawsuit was filed in 2009 but two employees who were part of the defined contribution plan that invested in funds managed by the defendant.
The funds took part in securities lending in a programme that involved the lending of securities held by borrowers who posted 102 per cent collateral. The collateral was placed in a pool, and then invested in fixed income instruments. The pools generated an income to the funds, part of which was paid to the securities lending programme manager, who is also a defendant.
It is alleged that the collateral pools were not managed prudently, causing the plaintiffs to lose money. It is further alleged that no changes were made to the strategy of the pool or securities lending programme even after the liquidity crisis began, which incurred further losses.
The case continues.
In a separate case reported earlier by Securities Lending Times, The Briscoe Law Firm, PLLC, founded by a former state prosecutor and enforcement attorney for the United States Securities and Exchange Commission, and the law firm of Powers Taylor, LLP are investigating potential legal claims available to purchasers of Northern Trust Corporation stock during the period of October 17, 2007 and October 20, 2009.
It has been alleged that NTRS and certain of its officers and directors violated the Securities Exchange Act of 1934 by issuing materially false and misleading statements regarding the Company's business and financial affairs, leading the Company's share price to be artificially inflated during the class period. Specifically, NTRS allegedly failed to disclose the extent of its delinquent commercial real estate loans and certain risks associated with its securities lending programme. During the class period, and while the stock traded at artificially high prices, top officers and directors for NTRS sold over 1.5 million shares of their stock, for proceeds of over USD106.5 million. Then on October 21, 2009, the Company announced that its third quarter results would not reach expectations, partly because of the serious decline of its securities lending program and its non-performing commercial loans. On that same day, NTRS's stock price fell more than over six per cent.
The motion formed part of the case of Diebold et al v Northern Trust, which is ongoing in Illinois. A lawsuit was filed in 2009 but two employees who were part of the defined contribution plan that invested in funds managed by the defendant.
The funds took part in securities lending in a programme that involved the lending of securities held by borrowers who posted 102 per cent collateral. The collateral was placed in a pool, and then invested in fixed income instruments. The pools generated an income to the funds, part of which was paid to the securities lending programme manager, who is also a defendant.
It is alleged that the collateral pools were not managed prudently, causing the plaintiffs to lose money. It is further alleged that no changes were made to the strategy of the pool or securities lending programme even after the liquidity crisis began, which incurred further losses.
The case continues.
In a separate case reported earlier by Securities Lending Times, The Briscoe Law Firm, PLLC, founded by a former state prosecutor and enforcement attorney for the United States Securities and Exchange Commission, and the law firm of Powers Taylor, LLP are investigating potential legal claims available to purchasers of Northern Trust Corporation stock during the period of October 17, 2007 and October 20, 2009.
It has been alleged that NTRS and certain of its officers and directors violated the Securities Exchange Act of 1934 by issuing materially false and misleading statements regarding the Company's business and financial affairs, leading the Company's share price to be artificially inflated during the class period. Specifically, NTRS allegedly failed to disclose the extent of its delinquent commercial real estate loans and certain risks associated with its securities lending programme. During the class period, and while the stock traded at artificially high prices, top officers and directors for NTRS sold over 1.5 million shares of their stock, for proceeds of over USD106.5 million. Then on October 21, 2009, the Company announced that its third quarter results would not reach expectations, partly because of the serious decline of its securities lending program and its non-performing commercial loans. On that same day, NTRS's stock price fell more than over six per cent.
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