New York Attorney General Eric Schneiderman is trying to stick a spoke in the wheel of the $8.5 billion mortgage-backed securities settlement that Bank of America (BAC) reached with The Bank of New York Mellon (BK) earlier this summer. Schneiderman filed a motion with a New York state court Thursday, requesting his office receive permission to intervene in all legal actions involving the proposed multibillion-dollar settlement that was cut to resolve issues stemming from the sale of toxic mortgage-backed securities. BofA struck the deal with BNY Mellon in June. The Bank of New York Mellon became a key party in the settlement as official trustee for 530 MBS trusts that had a combined principal balance of $424 billion in Countrywide Financial loans. In legal filings, Schneiderman said he believes the settlement ignores the interests of investors who had securities in the MBS pool and, without his involvement, fears the settlement will indemnify affected parties from future litigation, bar investors from seeking the full value of their losses and intervening in current and future legal proceedings that the AG's office is involved in. "BNYM cannot obtain the broad relief it seeks in this proceeding unless the interests of the trusts’ beneficiaries are adequately spoken for and protected," the AG's office said in court filings. The AG's office argues that Schneiderman "has statutory and common law authority to safeguard the welfare of New York investors and the integrity of the securities marketplace generally. Pursuant to this authority, the attorney general seeks to intervene in this proceeding to protect the marketplace and the interests of New York investors, the vast majority of whom otherwise are not present before the court in this proceeding," the AG added. Schneiderman also argued a settlement could bind investors who had no input whatsoever into the settlement negotiations between BofA and BNY Mellon. "The attorney general has an interest in ensuring that the trustee did not breach its fiduciary duty by negotiating the instant settlement and in ensuring that the beneficiaries are not denied a remedy for any such breach," the AG's office wrote in its filing. The AG also argued BofA and BNYM violated the Martin Act, a New York statute that gives the AG broad sweeping authority to investigate financial crimes. Schneiderman's office alleges in the filing that BNYM, as trustee, misled investors about pooling and servicing agreements governing the trusts. He added that Countrywide and BofA face Martin Act claims for making false representations about mortgages sold into the trust. The settlement deal also drew criticism from lawmakers and investors who claim the amount proposed is too low. Write to Kerri Panchuk.