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June 28, 2019updated 02 Jul 2019 9:33am

State Street hit with $88m fine for overcharging clients

State Street Bank and Trust Company has agreed to an $88m settlement with the US Securities and Exchange Commission (SEC) to resolve charges of overcharging mutual fund and other investment clients for custody services.

The settlement includes $40m in civil penalty and $48.78m in reimbursement.

The regulator accused State Street of gaining $170m by overcharging thousands of its clients.

The breaches took place between 1998 and 2015.

This includes a secret markup added to the cost of sending secured financial messages via SWIFT, through which the firm is said to have accumulated $110m.

In determining the penalty, SEC took into account State Street’s cooperation during the probe and the fact that it self-reported the issue.

State Street agreed to the settlement without accepting or refuting the allegations.

SEC director of Boston Regional Office Paul Levenson said: “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.

“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.”

State Street was embroiled in legal tussles over custody services earlier as well.

In 2016, the company was fined $382.4m for misleading custody clients in forex trades.

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