State Street success in securities lending legal complaint

State Street has succeeded in dismissing a complaint from a law firm over an alleged breach of “prudence and loyalty” within its securities lending programme.

Fishman Haygood Phelps Walmsley Willis & Swanson was an investor in the American Bar Association Members/State Street Collective Trust (ABA Trust).

Fishman Haygood’s complaint involved the reinvestment of cash collateral received in the trust’s securities lending programme, which it alleged had been reinvested in “long-term, high-risk instruments”, violating the Employee Retirement Income Security Act (ERISA).

However, the court upheld State Street’s call for the complaint to be dismissed, given that Fishman Haygood had not received “any actual injury” from the affair, a requirement for any complaint under Article III of ERISA.

While Fishman Haygood argued that a significant sum of money had been lost as a result of the reinvestment, the court sided with State Street.