Custody bank State Street Corp (STT.N) said it has agreed to resolve all pending litigation and regulatory matters in the United States related to its indirect foreign exchange business.
State Street said it expects to pay a total $530 million for the settlements, which would be fully covered by a previously established reserve, according to a statement on Tuesday.
The U.S. Justice Department said in a statement that under the settlement, State Street "admitted that contrary to its representations to certain custody clients, its State Street Global Markets division (SSGM) generally did not price FX transactions at prevailing interbank market rates."
State Street is paying at least $382.4 million under the settlement with the Department of Justice, to settle allegations that it deceived some clients of its indirect foreign currency exchange services, the Department of Justice said in a statement. The amount includes $155 million to be paid to the Justice Department, $167.4 million in disgorgement and penalties to the Securities and Exchange Commission, and at least $60 million to ERISA plan clients in an agreement with the Department of Labor.
“State Street’s custody clients, many of whom were public pension funds, financial institutions and non-profit organizations, had a right to expect that State Street would execute transactions in an honest and forthright manner,” Carmen Ortiz, the U.S. attorney for Massachusetts, said in a statement.
“Instead, State Street executed FX transactions in a manner that enabled it to reap substantial profits at the expense of its custody clients."
In addition, the Boston-based bank agreed to pay $147.6 million to settle private class action lawsuits filed by bank customers alleging similar misconduct, the Justice Department said.
These settlements exclude charges announced in April against two former State Street executives for scheming to defraud six clients, including Irish and British government pension funds, through secret commissions on billions of dollars of trades.
(Reporting by Ismail Shakil in Bengaluru; Editing by Leslie Adler)