Thursday, June 27, 2019

State Street Settles SEC Charges for Adding Undisclosed Markups on Client Expenses

State Street Bank and Trust Company has agreed to pay over $88 million to settle charges for overcharging mutual funds and other registered investment company clients for expenses related to the firm's custody of client assets. The overcharges included a secret markup that State Street tacked on to the cost of sending secured financial messages through the Society of Worldwide Interbank Financial Telecommunication (SWIFT) network.

As described in the order, State Street's clients agreed to pay the firm back for out-of-pocket custodial expenses that the firm paid on the clients' behalf. Instead of charging clients for the actual amount of the expenses, however, the SEC order finds that State Street routinely overbilled its clients. According to the SEC’s order, from 1998 to 2015, State Street collected $170 million from the overcharges, with $110 million coming from the hidden SWIFT markup charged to thousands of its registered investment company clients. Subsequently, State Street has been and undertakes to continue reimbursing these overcharges, with interest, to affected clients.

SEC Press Release

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