Security & Fraud

State Street Settles Secret Commission Charges, Pays $64.6M

State Street, the investment firm, has settled with U.S. investigators, agreeing to pay $64.6 million on claims it defrauded clients via secret commissions on trades.

According to a report by Reuters, six clients were defrauded through the commissions on billions of dollars of stock trades.

“Banks that defraud their clients in this way must be held accountable, no matter how big they are,” acting U.S. Attorney William Weinreb in Boston said in a statement, according to Reuters.

Under the terms of the settlement, State Street agreed to pay $32.3 million and an equal amount to the U.S. Securities and Exchange Commission. State Street admitted it conspired to add commissions on trades for six clients without them knowing it. State Street agreed to improve compliance at the firm and keep a corporate monitor as part of the deal.

In April, prosecutors announced they had indicted two former executives at State Street: Ross McLellan, a former executive vice president, and Edward Pennings, a former senior managing director in the bank’s London office. From 2010 to 2011, prosecutors contend the two added secret commissions to fixed-income and stock trades for the six customers. In 2014, State Street settled with the U.K.’s Financial Conduct Authority in which the bank paid a fine of £22.9 million (about $37.8 million) for charging the same six clients extra fees on certain transactions.

“State Street deeply regrets this matter and accepts responsibility for the actions of its former employees,” the company said in a statement, according to Reuters. This isn’t the first time State Street has been charged with bad practices. In July, it announced it would pay $530 million to settle inquires that State Street overcharged customers when making foreign currency transactions for them.

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