Legal costs eat into profits at investment company

PROVISION FOR a legal action brought by an investor have knocked a hole in profits at one of BNY Mellon’s Dublin operations last year.

Profits before tax at BNY Mellon Investment Servicing (International) came to $1.47 million in 2010, down nearly 80 per cent on the $6.6 million recorded in 2009, according to results just filed with the Companies Registration Office.

In their report, the directors state that, in January this year, the company agreed to settle proceedings issued by an investor in 2009 in relation to losses arising “due to an alleged delay in processing two redemption requests”.

The settlement was made without admission of liability. The accounts show that the company had set aside $5 million in provisions against the outcome of the action, an exceptional charge that accounts for the bulk of the fall in profits.

The directors also report that a liquidator to a fund administered by the company has given notice that he intends to take an action for damages against it.

No provision has been made for this second legal action which has yet to be subject of formal statement of claim and which the directors state they will defend on the basis that the BNY Mellon Investment Servicing (International) “has complied with the terms of the service agreement”.

BNY Mellon acquired the company – formerly known as PNC Global Investment Servicing – in a $2.31 billion cash deal last February. The transaction was completed in July.

It doubled the number of funds being serviced by BNY Mellon, which is now the largest fund administration firm in Ireland, and made it the second-largest player in fund accounting, administration and transfer agency globally. The accounts show that income at the business was static last year at $72.9 million, with a rise in income from fund administration offset elsewhere.

The acquisition by BNY Mellon of the company has also seen its group auditors, KPMG, replace PricewaterhouseCoopers as auditors of the unit.The company paid a dividend of $150,000 in November.

BNY Mellon employs 1,800 staff between its Dublin, Cork and Wexford bases.