State Street reaches $64 million settlement over transition management probe

Settlement with US regulators follows significant penalty paid to UK's FCA.
By Joe Parsons

State Street has agreed to pay more than $64 million to US authorities to resolve an investigation that the bank had deliberately overcharged six European clients for transition management services.

The settlement comes almost a year after US officials charged two former State Street executives in their part in the scheme.

Investigators claimed the State Street scheme defrauded six clients through secret commissions on billions of dollars of trades between February 2010 and September 2011.

As part of the settlement, the custody bank will pay $32.3 million to BOTH the US Securities Exchange Commission (SEC) and Department of Justice (DOJ).

“State Street deeply regrets this matter and accepts responsibility for the actions of its former employees,” the bank said in a statement on the settlement.

“The company fully reimbursed the six clients that were impacted, terminated responsible employees, appointed new executives to lead its transition management business, and implemented new and stronger controls.”

The settlement comes three years after State Street’s UK transaction management business was fined £22.9 million by the Financial Conduct Authority (FCA) for the scheme involving the two former executives.

State Street has said it has since doubled its headcount in compliance, significantly increased investment into compliance and risk management, and implemented firm-wide programmes on “ethical decision making”.