When State Street Bank disclosed an SEC probe into its foreign exchange processing, it showed the scope of this investigation is widening.
State Street Bank's disclosure that it is the subject of an SEC investigation into its foreign-exchange processing for pension funds signals a broader effort by the commission to delve into this lucrative business.
In a regulatory filing, State Street announced that the SEC and various law enforcement officials “have made inquiries or issued subpoenas concerning our foreign-exchange pricing." At issue is whether State Street charged pension funds the highest forex prices of the day on purchases, rather than the prices in effect at the time of the trade - and whether they failed to disclose information that would have revealed such a practice.
It's not the first time State Street has gotten into trouble over this issue. California's attorney general has sued State Street, claiming it followed these practices in dealings with the state's two largest pension funds, CalPERS and CalSTRS. The suit claims $56 million in damages and seeks additional remedies. Other attorneys general have filed similar suits, and State Street has settled a similar claim by Washington state for $12 million.
Bank of New York Mellon, State Street's chief rival in this line of business, is also facing numerous lawsuits and investigations. Stay tuned.
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