U.S. securities regulators have sanctioned State Street Bank and Trust Co. for overcharging institutional clients, such as mutual funds, for expenses incurred in providing asset custody services.
In a settlement with the U.S. Securities and Exchange Commission (SEC), State Street will pay US$88 million to settle charges that it overcharged clients by US$170 million between 1998 and 2015.
According to the SEC, the overcharging included padding the cost of sending secured messages through the SWIFT network, which accounted for US$110 million of the excess billing.
The firm settled the case, without admitting or denying the SEC’s allegations. The SEC said that its order acknowledges the fact that it self-reported the overcharging, cooperated with the regulator and is repaying its clients with interest.
The settlement includes US$48.8 million in disgorgement and a US$40 million civil penalty.
“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,” said Paul Levenson, director of the SEC’s Boston office.
“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,” he added.