State Street Corp. is being investigated by Massachusetts’ chief securities regulator over its handling of foreign-exchange transactions, the same issue that has drawn legal action from five other states.
Secretary of the Commonwealth William F. Galvin, whose office can pursue civil suits, has been examining the trades for two months, Brian McNiff, a spokesman, said in an interview. Massachusetts Attorney General Martha Coakley last year declined to back a lawsuit initiated by whistle-blowers claiming fraud by the firm.
State Street has been sued by the state of California and the $9.6 billion Arkansas Teacher Retirement System, Little Rock, for alleged fraud involving the pricing of some forex transactions. California asserted in October 2009 that State Street defrauded the $230.1 billion California Public Employees’ Retirement System, Sacramento, and the $152.9 billion California State Teachers’ Retirement System, West Sacramento, of a combined $56 million since 2001. The state is seeking more than $200 million in damages and penalties.
The type of bundled foreign-exchange transactions that spurred the lawsuits accounted for $335 million in revenue in 2010, or about 3.7% of sales, Edward Resch, State Street executive vice president and CFO, said at an April 19 earnings conference call.
State Street spokeswoman Alicia Curran Sweeney declined to comment on Mr. Galvin’s investigation.
Ms. Coakley’s office spent 15 months investigating claims made by Associates Against FX Insider Trading, a Delaware general partnership of unnamed whistle-blowers, and decided not to step in, according to court documents filed July 15, 2010.
The California suit was initiated by the same whistle-blower group, before the state’s attorney general took over the case.
Bank of New York Mellon, State Street’s largest rival, faces similar claims from Virginia, Florida and a public pension fund in Pennsylvania.
Both companies have said they will defend against the suits. Robert P. Kelly, chairman and CEO of BNY Mellon, and Joseph “Jay” Hooley, chairman, president and CEO of State Street, have said neither the suits nor the scrutiny they have brought to foreign-exchange pricing would negatively affect revenue from the business.