An IPERS lawsuit alleging Wall Street banks engaged in a wide-ranging conspiracy to maintain exclusive control of the $1-trillion-plus stock loan market can continue, a federal judge ruled this week.

The Iowa Public Employees' Retirement System filed a federal class action suit in August 2017 in the Southern District of New York. IPERS was joined by Los Angeles County Employees Retirement Association, the Orange County Employees Retirement System, the Sonoma County Employees Retirement Association and Torus Capital, LLC, a trading firm.

The lawsuit alleged that six investment banks ― Bank of America, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley and UBS ― "took collective, illegal action to boycott, attack and acquire multiple entities who tried to increase competition and lower costs in the stock loan market."

More:IPERS beats goal with nearly 8% gain on pension fund investments

In a January 2018 motion, attorneys representing the six banks asked for the case to be dismissed, arguing that the plaintiffs failed to state a claim that could be granted relief under the Federal Rule of Civil Procedure.

But U.S. District Court Judge Katherine Polk Failla denied that motion on Thursday.

"While it remains to be seen whether Plaintiffs’ factual allegations will be borne out in discovery," the New York judge wrote, "the Court is not permitted to dismiss them at this early stage of the litigation."

The defendants have until Oct. 26 to file an answer to the lawsuit.

Five of the banks declined to comment on the litigation when contacted by the Register on Friday. Morgan Stanley officials did not respond to a request for comment.

"IPERS is pleased to see that the judge is allowing this to proceed," IPERS Spokeswoman Judy Akre said Friday.

Unlike other financial markets, the suit claims that the stock loan market has not kept up with technological advancements. Without a central marketplace, the suit says borrowers and lenders face "an inefficient, antiquated, and opaque" system that requires intermediaries, known as prime brokers, who are predominantly large banks.

The six investment banks named in the suit are the nation's dominant prime brokers, the suit claims, controlling 60 percent of market revenues in 2016. The suit says the IPERS fund has "lent significant volumes of stock," to the defendants and their stock borrower clients since 2009.

The suit says banks have prevented participants from accessing marketplaces where they could benefit from direct trading and secure the best prices. Borrowers and lenders are essentially trading securities blindly, he said, in the dark on the true cost of transactions and fees.

The retirement systems allege that big banks have colluded to pocket higher profits, depriving investors of money that should flow to retirees, said plaintiff's attorney Michael Eisenkraft.

"This retirement fund supports thousands of thousands of retirees. So anything that hurts the fund hurts them," Eisenkraft told the Register in 2017. "The pension funds are making money. They’re just not making as much money as they should because of this practice."

In a statement Friday, Eisenkraft reiterated that point, claiming the banks' conspiracy was aimed at preventing the "antiquated stock loan market from evolving" in order to preserve profits.

The retirement systems are seeking damages and injunctive relief.

IPERS is the state's largest public employee retirement program, with more than 350,000 state, city, county and school district employees, plus former Iowa public employees and retirees.

The pre-paid fund issued $2 billion in retirement benefits during the last fiscal year, with $1.7 billion paid out in Iowa.