State Street has agreed to pay $382.4 million to settle US authorities' allegations that it applied hidden mark-ups to clients' currency trades.
State Street made "substantial" revenue by telling customers it guaranteed the most competitive rates on foreign exchange trades, the US Securities and Exchange Commission (SEC) said.
The bank made no effort to obtain the best price and instead applied a “predetermined, uniform mark-up” to the transactions, according to another statement from the US justice department.
The company will pay $167.4 million in disgorgement and fines to the SEC, a $155 million penalty to the justice department and $60 million to resolve allegations by the labour department.
State Street admitted to some of the SEC's claims in settling the case. "Matters of this nature can drain both time and resources; so where possible and appropriate we feel it is in State Street's and our clients' best interests to pursue settlements," said Mike Rogers, the bank's president and chief operating officer.
"State Street misled custody clients about how it priced their trades and tucked its hidden mark-ups into a corner where they were unlikely to notice," said Andrew J Ceresney, director of the SEC's division of enforcement. "Financial institutions cannot mislead their customers about their trading costs." – (Bloomberg)