State Street Corp. received a Wells notice from the SEC, notifying the firm that State Street and its affiliates may face a civil enforcement action over “possible violations” of securities laws, related to its disclosures and management of certain fixed-income strategies.
In a regulatory filing today, State Street said its principal subsidiary, State Street Bank and Trust, received notice on June 25 that SEC staff intends to ask the five-member commission for permission to pursue a civil enforcement action, related to an ongoing investigation of money management arm SSgA's management of those fixed-income strategies during 2007 and prior periods.
Over the past two years, State Street has faced a number of lawsuits from institutional clients alleging that SSgA had exposed those strategies to more risk than its clients were led to believe. On Jan. 3, 2008, the firm set aside a reserve of $618 million “to address legal exposure” associated with the underperformance of those fixed-income strategies, and recorded a net charge to earnings of $279 million.
State Street's regulatory filing noted that the firm will have the opportunity to present its views before the SEC makes any formal decision on an enforcement proceeding.
John T. Dugan, associate regional director of the SEC's Boston office, wasn't immediately available for further comment. SSgA spokeswoman Arlene Roberts declined further comment, beyond saying her firm continues to cooperate fully with the SEC.