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BlackRock Wins Dismissal of Securities Lending Case

On August 28, BlackRock won the dismissal of a lawsuit that accused the company of collecting “grossly excessive” compensation from the securities-lending returns to iShares.

The lawsuit alleged that BlackRock collected 40 percent of the net revenue from iShares securities lending transactions as compensation, which the plaintiffs considered as “excessive compensation” under Section 36(b) of the 1940 Act. Additional claims in lawsuit were filed under Section 47(b) for the right to rescind an unlawful contract and under Section 36(a), for breach of fiduciary duty.

However, on Aug. 28 U.S. District Judge Aleta Trauger in Nashville, Tennessee, threw out the case.  The court found that the exemptive order covering the securities lending activity precluded a suit under Section 36(b) and no private right of action exists under Section 36(a). While the court dismissed the case, it did give the plaintiff until September 17 to file an amended complaint.

The lawsuit was filed in January by Laborers Local 265 Pension Fund of Cincinnati, and Plumbers and Pipefitters Local No. 572 Pension Fund of Nashville.

To read the full complaint, click here.