Whistle-blower complaints have prompted Massachusetts to review trading operations at Bank of New York Mellon and State Street.  The focus of state and pension officials is foreign exchange, or forex, services.  Massachusetts is late in starting its investigations, as other states already have conducted reviews and now are suing the pair.  Both banks deny any wrongdoing.

While Massachusetts Secretary of State William Galvin declined to provide details into its forex review, a top state pension fund official said his group is planning to hire a consultant to review forex trades by its outside asset managers in recent years.  BNY Mellon serves as the agency's custodian, while a unit of State Street unit serves as an equity index manager and uses its own brokers and BNY Mellon for forex trade execution. 

The Massachusetts pension fund is somewhat unusual in that it uses outside asset managers to handle its investments, who are free to use either the state custodian BNY Mellon or other companies for forex transactions.

        Whistle-Blower Complaints.   Scrutiny into forex services follows whistle-blower complaints.  In some state lawsuits, the banks are accused of inflating their profits by charging customers artificially higher prices than what forex trades actually cost.  A spokeswoman for the North Carolina treasurer's office said it was reviewing forex work by custodians, which would include State Street and BNY Mellon. 

California, Florida, Virginia and public pension funds have already entered into lawsuits.   [Reuters, 4/29]