State Street to Pay $88 Million Settlement for Overcharging Clients

By Justin Baer 

State Street Corp. agreed to pay $88 million to settle the top U.S. securities regulator's allegations that the custody bank overcharged its investment-firm clients.

The Securities and Exchange Commission said State Street's bank-and-trust division had overbilled clients by $170 million from 1998 to 2015. Some $110 million of those charges stemmed from "a secret markup" State Street had added to the costs of sending secured financial messages over an international bank-payments network, the SEC said Thursday.

"For years, State Street sent clients a bill for expense reimbursement, without disclosing that State Street had added extra compensation for itself -- compensation that clients had not agreed to pay," Paul Levenson, director of the SEC's Boston office, said. "Fund expenses make a big difference to mutual-fund investors and advisers; they have a right to receive honest information about what they're paying for."

Millions of bank-payment orders course through the Society for Worldwide Interbank Financial Telecommunication, or Swift, network each day.

A State Street spokesman said the SEC's findings stem from billing errors the bank had itself disclosed in 2015.

"We have compensated the affected clients with interest, and we have and continue to invest significant resources to improve and strengthen our invoicing processes, controls and governance," the spokesman said. "The costs associated with this settlement are within our previously established reserve. We have not resolved at this time inquiries by all governmental authorities."

State Street is still in talks to resolve similar investigations by the U.S. Justice and Labor departments, a person familiar with the matter said.

Write to Justin Baer at [e-mail]

(END) Dow Jones Newswires

June 27, 2019 14:34 ET (18:34 GMT)

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