State Street to Pay $35 Million to Settle SEC Probe

By Dave Michaels

WASHINGTON -- State Street Corp. has agreed to pay $35 million to settle U.S. claims that it overcharged customers by using secret markups and failed to fully inform other clients about how its platform for trading Treasury securities worked.

The Boston-based bank agreed to the settlement in an order announced Thursday by the Securities and Exchange Commission. The SEC said the markups generated $20 million in improper revenue for the bank. State Street used false trading statements and other forms to misrepresent its compensation for executing customer trades in markets where prices are less transparent, the SEC said.

"Agreeing to a fee arrangement and then secretly tucking in hidden, unauthorized markups is fraudulent mistreatment of customers," said Paul G. Levenson, director of the SEC's Boston office.

State Street couldn't immediately be reached for comment. The bank, which didn't admit to or deny the probe's findings, previously disclosed the probable penalty amounts earlier this year.

The probe of State Street's venue for trading Treasury bonds involved an electronic platform called GovEx. The bank didn't tell all of its customers that it gave one client an additional functionality that allowed it to reject some trades. The special function allowed the client to reject 57 trades that each had a $1 million face value, the SEC said. The bank told one subscriber to GovEx that the platform didn't have the special feature, the SEC said.

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

September 07, 2017 12:26 ET (16:26 GMT)

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