American investment manager State Street has agreed to pay a fine of over $35m to the US Securities and Exchange Commission (SEC) to settle allegations of fraud and disclosure failures related to its US securities trading platform.

The regulator accused the bank of charging secret markups for transition management services and calling the markups a “fat finger error” and “inadvertent commissions” when detected by customers.

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In order to misrepresent its compensation on transactions, the investment firm made use of false trading statements, pre-trade estimates, as well as post-trade reports, SEC said.

According to SEC’s estimates, these fraudulent processes generated around $20m in improper revenue for the firm. State Street agreed to pay $32.3m in penalty to settle the fraud charges.

SEC director of the Boston regional office Paul Levenson said: “Agreeing to a fee arrangement and then secretly tucking in hidden, unauthorized markups is fraudulent mistreatment of customers.”

In response, a State Street spokeswoman said: “The impacted clients were fully reimbursed and over the past several years we have taken significant steps to strengthen our controls for our transition management business.”

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The firm was also accused of failing to make disclosures to its subscribers related to its securities trading platform for US Treasuries, known as GovEx.

“Despite marketing the system as “fair and transparent” it provided one subscriber with a “Last Look” trading functionality that allowed a short period of time for the subscriber to reject a match to a submitted quote,” SEC said.

The subscriber rejected 57 matches using Last Look with each one having a $1m face value.  However, the firm did not inform counterparties regarding the rejection process, the regulator said.

State Street agreed to a $3m settlement for the disclosure failures, without admitting or denying the charges.