State Street to Pay $88 Million Settlement for Overcharging Clients
June 27 2019 - 2:49PM
Dow Jones News
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 justin.baer@wsj.com
(END) Dow Jones Newswires
June 27, 2019 14:34 ET (18:34 GMT)
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