Sayles Co., Bloomberg Loomis, sued Citigroup Inc., alleging that the bank caused more than 70 million losses while executing two separate trading orders that swamped the market.
The Boston-based investment firm says Citigroup's global markets unit was serving as its broker in the purchase of more than 800,000 shares of Shopify Inc and the sale of more than 5 million shares of Colgate-Palmolive Co. The bank allegedly placed orders into an illiquid closing auction on March 18, despite being told to execute the trades in a manner that wouldn't affect daily market prices.
According to the complaint filed on Saturday, Citigroup did not conduct any meaningful liquidity analysis and instead flooded the market with orders, caused artificial price dislocation and made no attempt to reduce the size of the affected orders pursuant to New York Stock Exchange rules.
The complaint states that Loomis Sayles had told Citigroup that the order didn't need to be completed on the same day in the event of insufficient liquidity.
As of June 30, Loomis Sayles, which oversaw $291 billion, alleges breach of contract and fiduciary duty against the broker. The lawsuit seeks to represent 250 entities for whom Loomis Sayles served as an adviser or sub-adviser.
The closing auction resulted in a surge in the price of Shopify by $90 a share, causing Loomis Sayles $60 million in needless losses, according to the suit. The sale of the Colgate shares resulted in $10 million of losses, according to the complaint.
Colgate shares ended March 18 with a 3.9% loss compared to the previous day, while the price for Shopify stock went up 19%.
Loomis Sayles is an affiliate of Natixis Investment Managers and is represented by Foley Hoag LLP.
The case is Loomis Sayles vs. Citigroup Global Markets Inc, 22 cv 6706, US District Court, Southern District of New York.
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