BNY Mellon Sued After Allegedly Investing Trust Assets in Poorly Performing Funds

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Bank of New York Mellon, National Association is facing a proposed class action in which two plaintiffs claim the bank violated its fiduciary duties as a trustee by investing their trust’s assets in poorly performing mutual funds managed by the defendant’s affiliate.

According to the complaint, the defendant, as the trustee for the plaintiffs’ trust, was required to act as a prudent investor and buy shares in funds that have historically performed well in their respective categories. Instead, the case alleges, the bank invested 95 percent of the trust’s assets in mutual funds managed a bank affiliate, The Dreyfus Corporation, which the suit points out has consistently ranked towards the bottom of asset managers.

“Unsurprisingly,” the complaint reads, “the Dreyfus mutual funds in which BNY Mellon invested the assets of the trust were usually among the worst performing funds in their respective categories.”

The case argues that the defendant ignored its duty as a trustee to choose the best performing mutual funds in each category in which to invest assets. Instead, the lawsuit charges, Bank of New York Mellon favored its own interests, causing the plaintiffs to lose the value of their investments. From the complaint:

“Had BNY Mellon invested the assets of the [plaintiffs’] trust in well-performing mutual funds in each of these same categories, rather than in Dreyfus's poorly performing funds, then the trust would have earned over $100,000 more in investment income or appreciation in just the last five years.”