State Street Bank To Pay $530 Mln To Settle Foreign Exchange Cases

(RTTNews) - State Street agreed to pay $530 million to settle allegations that it deceived some of its custody clients when providing them with indirect foreign currency exchange service.

State Street Bank and Trust Company, a Massachusetts-based financial institution, agreed to pay a total of at least $382.4 million, including $155 million to the U.S. Department of Justice, $167.4 million in disgorgement and penalties to the SEC and at least $60 million to ERISA plan clients in an agreement with the U.S. Department of Labor to settle allegations that it deceived some of its custody clients when providing them with indirect foreign currency exchange (FX) services.

State Street will pay an additional $147.6 to resolve private class action lawsuits filed by the bank's customers alleging similar misconduct.

As part of the settlement with the Department of Justice, State Street admitted that contrary to its representations to certain custody clients, its State Street Global Markets division (SSGM) generally did not price FX transactions at prevailing interbank market rates.

Instead, State Street admitted that SSGM executed FX transactions by applying a predetermined, uniform mark-up (if the custody client was a FX purchaser) or mark-down (if the custody client was an FX seller) to the prevailing interbank rate for FX. State Street is also alleged to have falsely informed custody clients that it provided "best execution" on FX transactions, that it guaranteed the most competitive rates available on FX transactions and that it priced FX transactions based on a variety of factors when, in fact, prices were largely driven by hidden mark-ups designed to maximize State Street's profits.