DOW JONES NEWSWIRES
The U.S. Securities and Exchange Commission charged two men
affiliated with State Street Corp. (STT) with misleading investors
about their exposure to subprime investments.
The money manager agreed earlier this year settle similar
allegations by repaying investors more than $300 million. State
Street also paid nearly $350 million to investors to settle private
lawsuits.
The SEC alleged Thursday that John P. Flannery and James D.
Hopkins marketed one of State Street's bond funds as an "enhanced
cash" investment strategy that was an alternative to a money-market
fund. However, by 2007 the fund was "almost entirely invested" in
subprime residential mortgage-backed securities and derivatives.
They continued to describe the fund as less risky than a typical
money-market fund, and didn't disclose the extent of the
investments in subprime offerings.
Flannery was a chief investment officer at State Street and no
longer works there. Hopkins was a product engineer at the time, and
he currently is State Street's head of product engineering for
North America, said the SEC. The SEC contends the duo "played an
instrumental role in drafting a series of misleading communications
to investors."
The two couldn't immediately be located for comment.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855;
nathan.becker@dowjones.com;