BOSTON – State Street and Trust Company (State Street) will return $75 million in profits to resolve allegations it provided misleading information as to how it priced foreign exchange transactions, Attorney General Maura Healey announced today, July 28.
The agreement is part of a $382 million federal-state global resolution in conjunction with the U.S. Securities and Exchange Commission, the U.S. Department of Justice, and the U.S. Department of Labor, along with three class action lawsuits.
“This agreement will help protect the investments and savings of many retirees in Massachusetts,” said AG Healey. “Our office will continue our efforts to protect the assets of Massachusetts residents to help ensure their financial security.”
The agreement with the Massachusetts Attorney General’s Office requires State Street to provide $75 million in disgorgement, along with a payment of $500,000 to the Commonwealth. Additional disgorgement and penalties will be paid by State Street through separate agreements with federal enforcement entities.
State Street acts as a custody bank for a wide range of clients, many of whom invest in foreign securities that must be purchased and sold in the currencies of the countries in which they are traded. Dividends earned on foreign securities are also commonly paid in foreign currencies that must then be repatriated to U.S. dollars. To help execute these transactions, State Street offered its custody clients two primary methods of buying and selling foreign currencies, generally referred to as Direct FX and Indirect FX.
The Massachusetts Attorney General’s Office alleges that State Street made misleading representations indicating that its custody clients would receive more favorable exchange rates using Indirect FX than they actually did.
While State Street has already begun to provide more detailed information as to how it prices Indirect FX, the AG’s agreement ensures that State Street continues to do so.
This matter was handled by Assistant Attorney General Lydia French and Division Chief Glenn Kaplan of AG Healey’s Insurance and Financial Services Division, with assistance from paralegal Michael Beaulieu.