A USD150M settlement has been struck by Goldman Sachs with 2,887 current and former executives who had accused the bank of gender discrimination.

The class action lawsuit stated that the bank’s corporate culture fostered discriminatory behaviour ranging from the denial of pay rises and promotions to sexual assault and rape, dating back to 2002. Many of the claims centred on Goldman’s performance review process which plaintiffs said discriminated against female workers. Male workers consistently earned 8–22% more than female co-workers, and were more likely to be promoted. The firm was accused of maintaining a “boys’ club” atmosphere that often involved heavy drinking, and prevented women from accessing networking opportunities. The agreement, announced on May 8, was the largest of its type since the $150 million settlement in the ‘boom-boom room’ case at brokerage firm Smith Barney in the late 1990s.

Employment Practices Liability responds to employment claims against the insured company for a wide range of actual or alleged employment wrongs, including discrimination.

JP Morgan paid USD175m to acquire the online student loan application platform Frank. But during their negotiations, it turned out platform founder Charlie Javice had been less than frank.

Javice repeatedly misrepresented the size of the platform’s clientele by an order of magnitude, claiming it had 4.3 million users. In reality, it had fewer than 300,000. The US Department of Justice and the Securities and Exchange Commission (SEC) have each filed cases against Javice, who began exploring options for selling Frank in 2021, according to the DOJ. The deal soon attracted the interest of JP Morgan, and, in early August of that year, the bank asked Javice to verify the number of Frank users for the deal to proceed. Javice set about fabricating a dataset to support the inflated numbers, engaging a university professor to provide her with a list of 4.3 million fake customers. Once JP Morgan was satisfied the data had been approved, a deal was made, closing just over a month later, in September 2021. Under its terms, the bank paid USD175m to acquire Frank, hiring Javice and the start-up’s other employees as part of the deal. Javice received over USD21m for her equity stake in the company and a further USD20m as a retention bonus.

Throughout the negotiation process, Javice tried to cover her tracks by purchasing valid student data to update the first dataset she’d supplied. To this end, she contacted three different companies and made payments of $105,000 and $75,000 to two separate vendors. In 2022, JP Morgan used the new data in its first marketing campaign for the platform – but the campaign was unsuccessful and reached few recipients, raising red flags for the bank. Aware that it had been provided with bogus data, the bank dismissed Javice, along with the USD20m retention package, and set its legal action in motion.

Crime insurance provides coverage for the loss of funds due to various types of third party fraud, such as certain forms of documentary and computer fraud. However, it is not designed to respond to this particular risk scenario, i.e. acquiring a business on the faith of fraudulent representations. It is therefore unlikely that Crime insurance will respond to an event of this type. However, some policies are very widely drafted and can have a very broad trigger for third party fraud. If so, it's possible that coverage may apply in similar circumstances.

Pension fund AustralianSuper announced it would refund customers AUD70m after finding that it had charged excessive fees to customers with multiple accounts.

An internal investigation of accounts dating back to 2013 showed that the firm’s processes for identifying clients with multiple accounts had missed some cases, resulting in them being charged account fees several times.

Professional indemnity insurance does not cover the refunding of excessive fees. Indeed almost all professional indemnity policies will have an exclusion in that respect (often described as a Fees Exclusion or a Disgorgement Exclusion). However, a well drafted policy should provide coverage for costs incurred in responding to non-routine regulatory investigations into the provision of professional services.

The Commodity Futures Trading Commission fined HSBC USD45m for manipulative trading, spoofing and record-keeping failures.

Between 2012 and 2015, HSBC traders moved prices for interest rate swaps and discussed the activity on messaging platforms. Senior managers were aware of the practice and at times encouraged it, the regulator said. A supervisor of the US dollar swap desk also spoofed the swap market for around a year, but received no disciplinary consequences.

Fines are rarely insurable (due to public policy reasons and regulatory prohibition). However, a well drafted policy should provide coverage for costs incurred in responding to non-routine regulatory investigations into the provision of professional services.

BNP Paribas is to to pay EUR37.5m to settle allegations of mis-selling and bribery over derivatives sales to Dutch housing co-operative Stichting Vestia.

In 2012, Vestia suffered over EUR2.5bn in losses on interest rate swaps it had purchased via an intermediary, First in Finance Alternatives, from a number of banks, including BNP Paribas. Vestia’s treasurer, Marcel de Vries, who bought the derivatives, had been taking a share of First in Finance Alternatives’ commission from the banks for the sales of derivatives. Vestia filed a lawsuit in the UK High Court on September 17, 2020, claiming compensation of over EUR300m from BNP Paribas. The lawsuit alleged the derivatives transactions were void because BNP Paribas had jointly and indirectly bribed de Vries to enter into them. Vestia further alleged that the speculative, complex transactions that BNP Paribas had sold via First in Finance Alternatives fell outside its authority because they were not connected to its statutory purpose of operating affordable public housing. In July 2018, de Vries and a First in Finance Alternatives broker were convicted of fraud and bribery offences.

It appears the settlement here involves, at least in part, the repayment of fees. Indeed most successful mis-selling claims involve the defendant financial institution having to repay fees, commissions or profits. Coverage under professional indemnity insurance does not apply for such repayments. Almost all professional indemnity policies will have an exclusion in that respect (often described as a Fees Exclusion or a Disgorgement Exclusion).

A former World Exchange Services (WEX) employee, Alexey Sergeevich Ivanov, is alleged to have stolen USD38.7m in cryptocurrency from the Singapore-based crypto exchange.

In November 2018, Russian authorities launched a criminal investigation into theft and concluded that, in the previous month, Ivanov had stolen the cryptocurrency. He reportedly blocked access to WEX accounts and wallets, limiting access to funds and crypto assets before transferring various cryptocurrencies to his personal bank accounts. According to WEX’s owner, Ivanov was the only person who had all the exchange’s keys and passwords at his disposal when the incident took place. Ivanov has been indicted in Russia for the alleged fraud.

Crime insurance for cryptocurrency exchanges provides coverage for the theft of cryptocurrency by employees, amongst other things. This particular loss involves a Russian employee - insurers in the London market now require policies to include a specific exclusion applying to any assets, entities or persons located in Russia. In addition, insurers will not make payments that breach international sanctions.

Wells Fargo, which was ordered to pay USD38m in compensation to US oil firm Occidental Petroleum after the bank failed to execute hundreds of thousands of stock sales on agreed dates.

Wells Fargo was a trustee for Occidental. Following the company’s recommendation to diversify the trust holdings, Wells Fargo agreed to sell shares on specific dates in January 2020, when prices ranged from $45–47 per share. The bank sold a batch on January 7 as discussed, but most shares remained unsold and in the hands of Wells Fargo’s transfer agent, Equiniti. Remaining shares were not sold until March 20 that year, when the onset of the Covid-19 pandemic had already pushed their price down to $9.98. Wells Fargo was found to be in breach of contract and ordered to compensate Occidental for the difference between the price of the stock on the agreed sale dates and the actual sale price.

Professional indemnity insurance primarily responds to claims in respect of actual or alleged wrongful acts in the provision of professional services. All policies will have some form of contractual liability exclusion; however such exclusions usually only apply where liability assumed under contract would have not existed in the absence of the contract. In most cases the provision of professional services under contract will not create liability that would have not existed in the absence of the contract. Accordingly, claims of this nature have a good prospect of coverage.

Clover Health Investments is to pay USD22m to settle class action claims it misled investors before going public in a merger with a special-purpose acquisition company (SPAC).

Clover’s main line of business involved providing Medicare Advantage insurance to senior customers, using its Clover Assistant software platform to issue plans. On October 6, 2020, the company announced its intention to merge with Spac Social Capital Hedosophia Holdings to become a publicly traded company. Clover was valued at USD3.7bn in a deal that was executed on January 7, 2021. Hindenburg Research, a US investment analyst, published a report on February 4, 2021, that exposed the misrepresentations that Clover and its promoters had made. The report stated that the firm had not disclosed it was subject to an ongoing DOJ investigation into 12 separate issues and that unresolved problems included kickbacks, concealed third-party deals and marketing practices. The investigation posed a potential existential threat to Clover, since it was dependent upon Medicare, a government entity, for its income, said the research firm.

On publication of the report, the value of Clover shares fell by approximately 12.3% day on day, to $12.23 a share, on February 4,2021. The previous day’s close was $13.95 a share, from a high of $17.45 following the merger. The sudden drop in value resulted in a loss of USD700m to market capitalisation. On February 5,2021, a group of investors filed a class action lawsuit alleging they had purchased Clover shares at an artificially inflated price because the insurer had made materially false and misleading statements and concealed negative information. In particular, it claimed Clover had failed to mention the DOJ investigation, that an undisclosed third party was behind the major share of Clover’s sales, that its Seek Insurance subsidiary had misled customers about the extent of its independence – or that Clover had overstated the sophistication of its software.

Coverage for securities claims (aka Side C) is available under D&O insurance. In short, it responds to claims against the insured company for breaches of securities laws and regulations, including actual or alleged misrepresentations in respect of information provided to shareholders.

Chatham Asset Management has agreed to pay USD18.8m to settle allegations over illicit rebalancing trades in funds managed by the firm and its founder, Anthony Melchiorre.

Between January 2016 and December 2018, Chatham caused its clients to take concentrated ‘high-conviction’ positions in debt securities issued by companies in the print media industry, most notably American Media Inc. In 2014, Chatham installed two of its own employees on the four-person board of AMI’s parent, of which it also became the majority shareholder, effectively controlling it. In line with its strategy, Chatham caused its clients to take substantial positions in high-yield debt securities issued by AMI. On average, the bonds accounted for 11% of client portfolios, and clients collectively owned 83% of the bonds issued by AMI. When the next-largest holder of AMI bonds attempted to sell them on the open market, they were reportedly unable to find any purchaser other than Chatham clients. Chatham was frequently required to ‘rebalance’ fund portfolios by selling AMI bonds, but when it had to sell a high-conviction AMI bond, it rebought the bond for another of its clients. On the advice of a compliance consultant, Chatham aimed to transact through a single broker over more than one day or multiple brokers over a single day to ensure that the transactions occurred at independently derived market prices. But the trades were struck at a price proposed by Melchiorre as primary portfolio manager and agreed to by the brokers involved, often containing a spread added by Melchiorre to compensate the brokers and discourage them from offering the AMI bonds to any other customers in the market. Chatham engaged in over 100 such rebalancing trades, accounting for an average of 81% of customer trading in the AMI bonds. Over time, this caused the market price of AMI bonds to increase at a faster rate than that of similar securities, increasing the net asset values (NAVs) of the funds. Chatham was paid both a management and a performance fee for its advisory services to the funds, set as a percentage of NAV, and during the relevant period was paid an estimated USD11m by clients in combined fees.

This settlement appears to involve, at least in part, the repayment of fees. Coverage under professional indemnity insurance does not apply for the repayment of fees. Almost all professional indemnity policies will have an exclusion in that respect (often described as a fees exclusion or a disgorgement exclusion). If a settlement involves both compensatory payments and the repayment of fees, then the compensatory element should be insured under a professional indemnity policy, subject to the policy's terms and conditions.