State Street sued by Arkansas over currency deals
BOSTON | Thu Feb 10, 2011 8:47pm EST
BOSTON (Reuters) - State Street Corp, one of the world's largest custodial banks, was sued on Thursday by an Arkansas pension fund for overcharging clients on currency transactions.
The Arkansas Teacher Retirement System is the latest in a string of pension funds to accuse trust banks including State Street and rival Bank of New York Mellon Corp of having failed to give clients the best prices on foreign exchange trades.
In a complaint filed on Thursday in the U.S. district court in Boston, the Arkansas fund alleged that State Street's "unfair and deceptive FX practice has generated as much as $500 million in profits annually."
It said this rate of profit accounts for roughly half of State Street's foreign exchange profits over the last decade.
"This is money taken directly out of the pockets of State Street's custodial customers," the pension fund said in its lawsuit.
According to the complaint, Boston-based State Street calls itself the No. 1 servicer of U.S. pension plans and had roughly $4.4 trillion in pension fund assets in custody a year ago.
State Street was previously sued by California, which charged the company with having misappropriated $56 million from the accounts of the state's two largest pension funds, Calpers and Calstrs. Virginia has similarly sued Bank of New York Mellon Corp.
"State Street is firmly committed to providing its clients with quality service and transparency in meeting their FX needs. We will vigorously defend the allegations made in the complaint and we stand by our business practices," a spokeswoman for the company said in an e-mailed statement.
Since the news about these investigations first surfaced about a week ago, State Street's stock price dipped but then recovered. It closed up 1.3 percent on Thursday at $47.78.
The majority of custody bank currency trading is controlled by four banks -- State Street, Bank of New York Mellon, Northern Trust and JPMorgan Chase, industry analysts have said.
Several states have been investigating whether banks have been gouging pension funds and now several people familiar with the investigations are also saying that some mutual fund firms may have been overcharged.
The case is Arkansas Teacher Retirement System v State Street Corp et al, U.S. District Court, District of Massachusetts, No. 11-10230.
BOSTON | Thu Feb 10, 2011 8:47pm EST
BOSTON (Reuters) - State Street Corp, one of the world's largest custodial banks, was sued on Thursday by an Arkansas pension fund for overcharging clients on currency transactions.
The Arkansas Teacher Retirement System is the latest in a string of pension funds to accuse trust banks including State Street and rival Bank of New York Mellon Corp of having failed to give clients the best prices on foreign exchange trades.
In a complaint filed on Thursday in the U.S. district court in Boston, the Arkansas fund alleged that State Street's "unfair and deceptive FX practice has generated as much as $500 million in profits annually."
It said this rate of profit accounts for roughly half of State Street's foreign exchange profits over the last decade.
"This is money taken directly out of the pockets of State Street's custodial customers," the pension fund said in its lawsuit.
According to the complaint, Boston-based State Street calls itself the No. 1 servicer of U.S. pension plans and had roughly $4.4 trillion in pension fund assets in custody a year ago.
State Street was previously sued by California, which charged the company with having misappropriated $56 million from the accounts of the state's two largest pension funds, Calpers and Calstrs. Virginia has similarly sued Bank of New York Mellon Corp.
"State Street is firmly committed to providing its clients with quality service and transparency in meeting their FX needs. We will vigorously defend the allegations made in the complaint and we stand by our business practices," a spokeswoman for the company said in an e-mailed statement.
Since the news about these investigations first surfaced about a week ago, State Street's stock price dipped but then recovered. It closed up 1.3 percent on Thursday at $47.78.
The majority of custody bank currency trading is controlled by four banks -- State Street, Bank of New York Mellon, Northern Trust and JPMorgan Chase, industry analysts have said.
Several states have been investigating whether banks have been gouging pension funds and now several people familiar with the investigations are also saying that some mutual fund firms may have been overcharged.
The case is Arkansas Teacher Retirement System v State Street Corp et al, U.S. District Court, District of Massachusetts, No. 11-10230.