02 June 2017
Missouri
Reporter: Drew Nicol

US pension fund wins $123m in securities lending fund valuation dispute


The Public School Retirement System of Missouri (PSRS) received $123 million to settle litigation against State Street over incorrect fund valuations in the bank’s time as the pension fund’s agent lender.

PSRS of Missouri stated in its 2016 financial report that the Cole County Circuit Court for Missouri ruled in favour of the pension fund to conclude a long-running dispute with State Street regarding the terms of the trust agreement for one of its short-term investment funds in 2009.

State Street, which acted as custodian and agent lender for PSRS of Missouri at the time, incorrectly believed it had the right to re-value investments in the fund based on a series of prior authorised, custodial bank-approved, redemptions.

The bank reduced the fund's valuation by approximately $96 million in October 2009, which PSRS of Missouri stated it “strongly contested” at the time.

PSRS was offered its revalued portion of the fund as an in-kind distribution, which was utilised to pay for a customised collective investment pool to facilitate securities lending activities.

The pension fund subsequently filed a lawsuit against State Street on 18 September 2009 in an attempt to prevent the bank from taking such action.

Upon receipt of the settlement, which the court ruled was to be paid by State Street, PSRS of Missouri dismissed its lawsuit and terminated their relationship in October 2010.

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