State Street has entered settlement talks with a mediator over allegations by the Arkansas Teachers’ Retirement System (ATRS) that the bank overcharged on FX trade fees.
The lawsuit, which was filed in U.S. district court in Boston on Feb. 10 2011, alleges that State Street made up to $500 million annually by inflating exchange rates when buying and deflating rates when selling, taking the difference as profits.
State Street is custodian for the $9 billion ATRS. According to the pension funds complaint, the alleged markups happened through non-negotiated, or indirect, FX trades, where the pension fund thought they were being charged the interbank rate, but were actually charged more.
A spokesperson for State Street could not immediately be reached, however, the bank has denied the charges in court. In May, a motion by State Street to dismiss the case was denied. It agreed to the mediation in a court meeting on June 22 2012, but a date was not set. The parties must report back to the court on Aug. 30 2012 on the status of the mediation.
The case is Arkansas Teacher Retirement System v. State Street Corp et al, U.S. District Court, District of Massachusetts, No. 11-10230.
Separately, Global Custodian in May reported that the U.S. Department of Justice, the U.S. Department of Labor and the U.S. Securities and Exchange Commission are investigating State Streets FX division and have requested information and have subpoenaed the bank in relation to the pricing of FX services.
(OS)