The U.S. attorney for the Southern District of New York and the New York attorney general have made inquiries to State Street Corp. regarding the company's “execution methods” for non-negotiated foreign-exchange trades that State Street conducts on behalf of custody clients, according to the company's latest annual report.
State Street cited those inquiries in the section of the annual report it filed with the SEC on Monday regarding various risk factors State Street could face.
Noting that since 2009, authorities in California and Massachusetts had filed claims against the company related to foreign-exchange services, State Street, in its annual report, said it can provide “no assurance as to the outcome” of those proceedings, or other proceedings that “might be commenced against us by clients or government authorities.”
Asked about the report on the New York-related inquiries, State Street spokeswoman Arlene Roberts declined to comment beyond reiterating that “State Street continues to cooperate with inquiries regarding our indirect FX services and vigorously defend itself against the litigation that has been commenced against us.”
Jerika Richardson, a spokeswoman for Preet Bharara, the U.S. attorney for the Southern District of New York, declined to comment. A spokesman for New York Attorney General Eric T. Schneiderman wasn't immediately available for comment.
Big custody banks, including State Street and Bank of New York Mellon, have faced growing scrutiny in recent years with regard to the standing order portion of their foreign-exchange businesses, which often involves smaller trades or transactions involving less widely used currencies.
In its discussion of risks facing the company now, State Street's annual report said, “We expect that plaintiffs will seek to recover their share of all or a portion of the revenue that we have recorded from providing indirect foreign exchange services” — about $331 million for the year ended Dec. 31, about $336 million for the year ended Dec. 31, 2010, about $369 million for the year ended Dec. 31, 2009, and about $462 million for the year ended Dec. 31, 2008.