A court has rebuffed two pension plans suing BlackRock for what they claimed was "grossly excessive" compensation taken by the investment giant through short-selling involving its iShares ETFs.
U.S. District Judge Aleta Trauger ruled in Nashville that the suit – filed in January by Laborers Local 265 Pension Fund, based in Cincinnati, and Plumbers and Pipefitters Local No. 572 Pension Fund of Nashville – had no standing under the Investment Company Act of 1940.
"Without congressional intent expressed in a statute, a cause of action does not exist and the courts may not create one," Trauger ruled.
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Both unions invested in iShares. The lawsuit said BlackRock kept 40 percent of net revenues including administrative fees, which were not returned to the iShares funds.
Trauger dismissed the suit without prejudice but gave the unions until Sept. 17 to file an amended claim.
When the suit was filed, BlackRock defended its methods.
"Our securities lending program has delivered above-average returns to our ETF shareholders over time," Caroline Hancock, a BlackRock spokeswoman, told Bloomberg in an emailed statement. "To achieve this, we run the program ourselves while bearing all the costs, rather than outsourcing to third parties as others do."
The pension funds had asked the court for unspecified damages and to stop the iShares trading until the matter was addressed through negotiation with the funds and iShares.
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