Ross McLellan, former executive vice president of State Street Corp. and president of its U.S. broker-dealer unit, was charged Friday by the SEC with charging hidden fees on securities trading for State Street's transition management clients.
The civil lawsuit, filed in U.S. District Court in Boston, claims that State Street employees working under Mr. McLellan's supervision misrepresented the prices of certain transition management tasks through false trading statements, pre-trade estimates and post-trade reporting, according to court documents.
The Securities and Exchange Commission claimed the activity fraudulently generated about $20 million in additional revenue for State Street.
According to the court documents, the SEC is seeking unspecified reimbursement to clients and fines.
The lawsuit follows criminal charges filed April 5 by the Justice Department, also in U.S. District Court in Boston, against Mr. McLellan and Edward Pennings, a former managing director at State Street. The two were charged with securities fraud and wire fraud as well as conspiring to commit securities fraud and wire fraud.
Mr. McLellan pleaded not guilty to those charges and was released on $250,000 bond secured by his house. Mr. Pennings is believed to be living abroad. Mr. McLellan's next court appearance is scheduled for May 19.
In a statement from State Street spokesman Anne McNally, the company said, "The charges relate to the overcharging in 2010 and 2011 of six EMEA clients of our U.K. transition management business. These same transitions were the subject of our January 2014 settlement with the U.K. Financial Conduct Authority."
The statement added that State Street has “been cooperating with the U.S. governmental authorities about this matter for the past few years. Since 2011, we have significantly strengthened our controls and reporting mechanisms within this business.”
Mr. Paul could not be immediately reached for comment on the SEC charges.
