(Reuters) - State Street Corp agreed to pay $94.3 million to settle federal and state regulatory charges it routinely overcharged mutual fund customers and other clients over roughly 17 years by adding hidden markups on back-office expenses.
Thursday’s settlements with the U.S. Securities and Exchange Commission and Massachusetts Attorney General Maura Healey resolve allegations that State Street overbilled clients by more than $170 million related to its custody of their assets.
The SEC said roughly 5,000 clients incurred more than $110 million of the overcharges when State Street tacked on markups for sending messages through SWIFT, a secured international payments network used by banks and other financial companies.
“Fund expenses make a big difference to mutual fund investors and advisers,” Paul Levenson, director of the SEC office in Boston, said in a statement. “They have a right to receive honest information about what they’re paying for.”
State Street will pay a $40 million civil fine plus $48.8 million of disgorgement and interest in the SEC settlement, and a $5.5 million civil fine to Massachusetts.
It did not admit or deny wrongdoing, and was credited by the SEC for disclosing its conduct and cooperating. State Street previously set aside money to cover both settlements.
“We regret these invoicing errors and the impact on our clients,” State Street said in a statement.
State Street is one of the world’s largest custodial banks, which provide services such as accounting, asset valuations, currency trading, portfolio servicing and stock lending.
The Boston-based company had $32.6 trillion of assets under custody and administration as of March 31, as well as $2.81 trillion of assets under management.
State Street said it began reviewing customer invoices in 2015, and has since reimbursed most customers affected by the overcharges, while also improving its billing processes.
It has said it was cooperating with probes by the U.S. Department of Justice’s civil and criminal divisions into its invoicing, which Thursday’s settlements do not cover.
The Justice Department did not immediately respond to a request for comment.
In July 2016, State Street agreed to pay $530 million to settle regulatory probes and private lawsuits claiming it overcharged clients on foreign currency transactions.
Reporting by Jonathan Stempel in New York; Additional reporting by Nate Raymond in Boston, Editing by G Crosse and Lisa Shumaker
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