State Street Corp. will pay $89.75 million to settle a class-action lawsuit with a group of employee benefit plans invested in certain active fixed-income strategies managed by its SSgA unit, confirmed Arlene Roberts, State Street spokeswoman.
The proposed settlement is subject to court approval.
State Street officials declined to disclose other details about the plans or the court, Ms. Roberts said.
The proposed settlement “relates to certain active fixed-income strategies managed by SSgA during 2007 and earlier periods,” she added in the statement.
Separately, State Street added $250 million to its legal reserve, raising it to $443 million, to cover potential monetary damages related to losses by investors in certain SSgA active fixed-income strategies, according to a separate State Street statement.
The company said the increased reserve should be sufficient to cover the potential cost to resolve ongoing litigation as well as proceedings by the SEC and other government authorities.
State Street is still in discussion with the SEC over a Wells notice it received June 25, Ms. Roberts said. The notice warned State Street and its affiliates they may face a civil enforcement action over “possible violations” of securities laws, related to its disclosures and SSgA's management of certain fixed-income strategies up to and during 2007.
SEC spokesman John Heine said SEC officials would neither confirm nor deny any State Street investigation.
A number of institutional clients have filed lawsuits against State Street, alleging SSgA exposed active fixed-income strategies to more risk than they were led to believe. The claims related to investment losses in the strategies that included subprime investments, according to an Aug. 10 SEC filing by State Street.
For all of 2009, State Street expects operating earnings per share to be between $4.13 and $4.17, excluding the impact of the extraordinary loss recorded upon consolidation of the commercial paper conduits in the second quarter of 2009 and the provision for legal exposure it announced today.