Class action sought in State Street suit
By Christine Williamson | April 8, 2009 10:53 am
State Street Corp. (STT), along with SSgA and two other subsidiaries were named Tuesday in a federal lawsuit seeking class-action status, claiming the firms breached their fiduciary responsibilities in the management of its securities lending program for retirement plans.
The suit, filed on behalf of the Fishman Haygood Phelps Walmsley Willis & Swanson LLP 401(k) plan, New Orleans, claims institutional investors suffered losses from imprudent investment of the cash collateral pools that support the securities lending program connected with SSgA’s collective trusts.
“The collateral (pools are) supposed to be invested in safe, short-term, liquid instruments,” according to a news release from the plaintiff’s attorneys. “State Street … instead chose investments that were illiquid, highly leveraged and unduly risky, including mortgage-backed securities and other securitized debt instruments that were inappropriate investments for retirement plans.”
The complaint also alleges that State Street and its subsidiaries made prohibited transactions involving ERISA plan assets in collecting fees and other compensation from the securities lending.
The suit was filed in U.S. District Court in Boston. The size of Fishman Haygood’s plan or the extent of its losses could not be learned.
Arlene Roberts, a State Street spokeswoman, could not be immediately reached.