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Compliance April 17, 2020
Licensing Lawsuit Filed by SEI Global against SS&C Defendants
The complaint alleging abusive licensing practices was filed under seal in the U.S. District Court for the Eastern District of Pennsylvania and has only just been made public.
Reported by John Manganaro
SEI Global Services has filed a lawsuit against SS&C Advent and SS&C Technologies Holdings alleging the defendants are harming the firm through abusive licensing practices.
The lawsuit was filed in late February under seal in the U.S. District Court for the Eastern District of Pennsylvania and has only just been made public.
The complaint states that SEI is “a provider of outsourced portfolio accounting (and related administrative) services to investment managers and hedge funds, a business in which it competes with SS&C.” Also noted is that SEI uses accounting software licensed from Advent in connection with its provision of portfolio accounting services to its clients.
“SEI had no issues or disputes with Advent from the inception of the contract between the parties in 2000 until the end of 2019,” the complaint states. “This dispute followed the acquisition of Advent by SS&C, a direct competitor of SEI, in 2015. Between 2015 and 2019, peace between the companies still existed. However, SS&C decided to flex its muscles in the fall of 2019 by raising a series of disingenuous positions to gain an advantage over SEI, leaving SEI no choice but to file this lawsuit to protect itself.”
According to the lawsuit, SEI and Advent executed a software license and support agreement on September 9, 2000. The agreement allegedly “renews automatically unless SEI elects not to renew it, or if one of the parties terminates pursuant to the termination provision.” According to SEI, the agreement has been subsequently amended by the parties but has not been terminated.
“The agreement and its amendments cover a series of license keys from Advent that deliver critical data and portfolio accounting processing functionality to SEI,” the complaint states. “The license keys provided by Advent to SEI dictate which components/capabilities SEI is able to use within the Advent software. The functionality provided by Advent’s software is viewed as standard in the industry and can only be delivered through contracting with defendants.”
The complaint goes on to suggest that while SS&C is SEI’s direct competitor, Advent traditionally was not. However, that allegedly changed with the SS&C acquisition.
“SS&C dominates, controls, manages and operates Advent, to such an extent that, at all times since its acquisition, there existed a unity of interest between SS&C and Advent and complete ownership of Advent by SS&C,” the complaint states. “Advent is SS&C’s alter ego. SS&C is using its alter ego as an instrumentality or conduit to effect its own anticompetitive objectives. Now that SS&C owns Advent, defendants are now attempting to unilaterally and improperly revoke the information to which SEI is entitled under the agreement, in violation of the terms of the agreement. This improper termination will cause substantial harm to SEI’s business.”
According to the complaint, other investment accounting systems exist in the marketplace, but SEI would allegedly need “substantial time to research other systems, select a replacement, contract with another vendor and convert its business from the Advent-provided software to an alternative software.”
“This process would take years,” the complaint states. “It would necessarily disrupt SEI’s business, and may not be successful. Even if SEI were to successfully switch to other portfolio accounting software, doing so would likely come at a significant competitive cost to SEI because many investment managers have a strong preference for using Advent software and will only work with providers of outsourced portfolio accounting services that have access to Advent’s products.”
SEI says it has tried to negotiate with the defendants in good faith, but that the defendants have refused to heed the terms of the agreement, “giving SEI no choice but to file this lawsuit to protect its business.”
According to the complaint, on October 31, 2019, Robert Roley, a senior vice president at Advent, sent an unexpected letter to SEI on “SS&C Advent” letterhead. This letter stated the following: “You are hereby notified that unless Advent and SEI are able to reach mutually satisfactory terms for a renewal of the below-listed software products and services, Advent is unwilling to renew or extend the present term for such products. Therefore and for the avoidance of doubt, you are hereby notified that Advent hereby elects not to renew any of the products upon the expiration of their current terms.”
SEI claims that it has engaged in subsequent discussions with defendants in an effort to resolve this dispute in good faith.
“However, defendants’ pricing proposal included an over 40% increase in rates to SEI, despite the agreement’s 3% cap on pricing increases per year,” the complaint states. “This proposal is in itself a breach of the agreement and is an attempt to extort SEI. As a 40% increase is clearly not made in good faith, this proposal is unacceptable to SEI.”
SS&C provided the following statement regarding the litigation: “SS&C finds this suit to be without merit. After the suit was filed by SEI under seal, SS&C successfully petitioned the Court to unseal the action despite SEI’s objection. SS&C abides by its contracts and we or our predecessor companies have enjoyed a twenty year relationship with SEI Corporation.”
The full text of the complaint is available here.
