Ireland's €13.4 billion ($17.3 billion) National Pension Reserve Fund, Dublin, was charged 5.5 times the fee it contracted with transition manager State Street Bank Europe for a 2011 assignment involving €4.7 billion in NPRF assets, according to a report Thursday by Ireland's comptroller and auditor general.
The summary, which accounted for less than 10 of the report's 365 pages, said the NPRF had contracted to pay SSBE €698,000 to liquidate the €4.7 billion, but “SSBE also applied commissions of €2.6 million for which there was no contractual agreement” in addition to earning €600,000 on the sale of NPRF's holding in an index fund “while acting as a principal but without taking any risk of loss.”
The report said State Street Bank Europe has refunded the NPRF for both the unauthorized commissions and the principal trading profits.
State Street Bank Europe had been one of three transition managers selected following a search in 2007.
The report detailed how the National Treasury Management Agency, which oversees the Irish pension fund, made inquiries to State Street Bank Europe in October 2011, after media reports of two senior executives leaving the firm's transition team.
The report noted that, later that month, State Street Bank Europe informed the agency later that it had reimbursed a U.K. client for a commission that had not been expressly agreed to with that client, and that SSBE was conducting a comprehensive review of other management-fee-only transition assignments the bank had conducted in 2011.
In mid-November 2011, SSBE informed the NTMA that it had found that commissions for which there had been no contractual basis had been applied to the NPRF transactions. SSBE repaid the NPRF more than €2.6 million to cover the overpayments.
State Street spokeswoman Alicia Curran Sweeney said the details announced Thursday relate to a transition management issue that State Street reported to the U.K.'s Financial Services Authority in September 2011, and the transition team members whom State Street found hadn't lived up to the company's standards are no longer working for the firm. State Street has “strengthened our transition management business and enhanced our controls,” she said.