State Street fined $38 mln for overcharging clients
LONDON Jan 31 (Reuters) - Britain's financial watchdog has fined State Street UK 22.9 million pounds ($38 million) for deliberately overcharging some of its clients, and said the custody bank acted with "complete disregard" for the interests of its customers.
Between June 2010 and September 2011 State Street UK , a unit of the world's second-largest standalone custody bank State Street Corp, overcharged six clients a total of $20.2 million, the Financial Conduct Authority (FCA) said.
Those clients included large investment management firms and pension funds holding the funds and savings of retail investors. Custody banks manage cash for companies and handle back-office processing of securities and banking transactions for fund managers.
The FCA said the firm had developed and executed a deliberate strategy to charge substantial mark-ups on agreed fees.
The overcharging was concealed from clients, the FCA said, and only came to light after one discovered the mark-ups and notified State Street staff.
"The findings we publish today are another example of a firm that has acted with complete disregard for the interests of its customers," Tracey McDermott, director of enforcement and financial crime at the FCA, said.
State Street said in a statement it deeply regretted the failings and had worked hard to enhance its controls over the past few years. The firm also dismissed staff in 2011 who were centrally involved in the overcharging.
"Their behavior was unacceptable and a significant departure from the high standards of conduct and transparency that we expect and certainly not consistent with the manner in which our employees act on behalf of clients every day," it said.
"We believe we now have industry leading controls within our transition management business and have bolstered our control functions in the UK, broadening the depth of talent that oversees our businesses," it added.
State Street was given a 30 percent discount on its fine for settling with the FCA at an early stage.