The U.K.'s Financial Conduct Authority has fined State Street U.K. £22.9 million ($37.7 million) for deliberately overcharging six transition management clients between June 2010 and September 2011, to the sum of $20.2 million, according to an FCA statement.
The regulator said the overcharging accounted for more than a quarter of State Street U.K.'s transition management business revenue during the period.
“State Street U.K.'s transitions management business had developed and executed a deliberate strategy to charge clients substantial markups on certain transactions, in addition to the agreed management fee or commission,” the FCA said in a statement published on its website Friday. “These markups had not been agreed by the clients and were concealed from them.”
“State Street U.K. allowed a culture to develop in the U.K. (transition management) business which prioritized revenue generation over the interests of its customers,” said Tracey McDermott, director of enforcement and financial crime, in the statement. “Their conduct has fallen far short of our expectations. Firms should be in no doubt that the spotlight will remain on wholesale conduct.”
The overcharging came to light when a client told State Street staffers that it had found markups on trades to which it had not agreed.
When senior management became aware, State Street U.K. investigated and implemented a program to improve controls, governance and culture across its U.K. businesses, the FCA said. The firm's early settlement means it qualified for a 30% discount on the fine.
State Street U.K. dismissed centrally involved individuals in 2011, according to a statement from the firm. “Their behavior was unacceptable and a significant departure from the high standards of conduct and transparency that we expect and certainly not consistent with the manner in which our employees act on behalf of clients every day,” the statement said.
Lucy Davidson, State Street's European spokeswoman, didn't comment beyond the statement.
