A class-action complaint filed today in the Southern District of New York alleges that S&P Global, Cusip Global Services (CGS), the American Bankers Association (ABA), and now FactSet—CGS’s new operator—“have conspired for decades to eliminate competition” in the use of Cusip numbers, and that the hefty licensing fees that S&P and CGS have for years charged financial institutions to use the numbers are “based on bogus and malleable claims that a copyright owned by the ABA allowed them to impose these restrictions.”

The complaint names broker-dealer Dinosaur Financial Group LLC and Swiss Life Investment Management Holding AG as plaintiffs, but was filed on behalf of a class, which includes all persons or entities, not including data vendors, who paid a license fee to S&P or FactSet pursuant to CGS’s subscription agreement and use of services statement at any time beginning at least four years prior to the complaint’s filing.

Furthermore, the complaint alleges that neither S&P, CGS, nor the ABA had the legal right, and FactSet does not have the legal right, to control the use of Cusips by financial institutions, and that the parties therefore had and have no legal basis to impose either the license agreements or the license fees, adding that such conduct violated Sections 1 and 2 of the Sherman Antitrust Act, which was enacted in 1890 to protect against monopolistic behavior, Section 4 of the Clayton Act, an anti-trust law enacted in 1914, and the US Copyright Act of 1976.

The plaintiffs are seeking a judgment on whether the defendants have engaged in anti-competitive conduct and restitution of fees paid by financial institutions, including plaintiffs, among other reliefs. The plaintiffs requested a trial by jury, should the complaint go forward.

Representatives for S&P, Cusip Global Services, and FactSet declined to comment. The ABA did not respond to a request for comment.

“I’m stunned,” says a sell-side source and Cusip user, who also does not think the case will go far. “I think the trial by jury is a leap because most of the agreements stipulate arbitration as a means to resolve contractual issues.”

Object of scorn

In North American securities markets, the nine-digit Cusip number is the most widely used identifier of its kind. It functions as a unique barcode on all stocks and registered bonds in the US and Canada.

Its 12-digit counterpart serving the rest of the world—the International Securities Identification Number (Isin)—is owned by the International Organization for Standards (ISO) but operated by more than 120 national number agencies, which are responsible for Isin assignments in their respective countries. In the US, Cusip Global Services (CGS) is responsible for assigning US Isins in addition to Cusips.

The Cusip system, including US Isins, has long drawn ire from the industry, which has no choice but to use it for functions that include trading, clearing and settlement, reporting, internal data management and record-keeping, making it a de facto industry utility. For each individual use of a Cusip number, users must pay for issuance and licensing.

An end-user using the Cusip numbers of more than 40,000 securities throughout four or more business lines in three or more regions, would potentially incur $477,750 in fees. Since CGS was established, the majority of revenue and fees had gone to S&P, while a minority royalty was paid back to the ABA on each Cusip contract inked. It’s understood that structure has not yet changed under FactSet, which closed on its acquisition three days ago.

In a blockbuster deal announced in December 2021, FactSet acquired Cusip Global Services for nearly $2 billion from S&P Global, which had operated the standard on behalf of its owner, the American Bankers Association, for more than 50 years. The European Commission had previously stipulated that S&P divest Cusip as part of its ongoing merger with IHS Markit.

Lawyers Leiv Blad of Competition Law Partners and David Nimmer of Irell & Manella, both of whom are representing the plaintiffs, declined to comment.

This is a developing story.