("SEC Charges Two State Street-Affiliated Men In Subprime Case,"
published at 11:55 a.m. EDT included incorrect information from the
SEC that one of the two men charged still works for State Street. A
corrected story follows.)
DOW JONES NEWSWIRES
The U.S. Securities and Exchange Commission charged two former
employees of 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.
State Street said it "has resolved this matter, both in terms of
addressing client concern and settling with the SEC."
Flannery was a chief investment officer at State Street, while
Hopkins was a product engineer. Neither work for the company now.
The SEC contends the duo "played an instrumental role in drafting a
series of misleading communications to investors."
The two men couldn't immediately be located for comment.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855;
nathan.becker@dowjones.com