The Securities and Exchange Commission has arrived at a global settlement with State Street Bank and Trust Company. According to the regulator, State Street misled custody clients, including mutual funds, about hidden markups that were added to foreign currency exchange trades. The firm will pay $382.4M, including $167M in penalties and disgorgement to the Commission, a $155M penalty to the U.S. Justice Department, and at least $60M to ERISA plan clients.<\/p>\n
Among the other services it provides, State Street facilitates indirect foreign currency exchange trading for clients so that they can sell and purchase foreign currencies in transactions involving foreign securities. An SEC probe found that State Street made a substantial chunk of money in revenue when it misled some clients about Indirect FX, claimed that it offered the most competitive rates on trades, charged \u201cmarket rates,\u201d and provided \u201cbest execution.\u201d The Commission contends that the company did not try to get the best prices for clients.<\/p>\n
The SEC believes that State Street concealed markups so that custody clients would not notice. It also found that registered investment company custody clients were given monthly transaction reports and trade confirmations that were materially misleading because of misrepresentations about foreign currency exchange transaction pricing.<\/p>\n