State Street Corp., which in March acquired General Electric’s GE Asset Management division in Stamford for a reported $485 million, violated Massachusetts state securities law by overcharging customers up to $200 million, according to Massachusetts Secretary of State William Galvin.
Galvin said his office filed a formal complaint against Boston-based State Street Global Markets on April 20 for what he called “dishonest and unethical activity.”
“State Street commonly charged out-of-pocket expenses to custodial clients, including pension fund, mutual fund, hedge fund and institutional investors,” according to the complaint.
Galvin further alleged that charges for secure electronic messages about payments, securities and trade “contained concealed markups as high as 1,900 percent,” with clients being billed $5 for each message, which actually cost just $0.25.
In December, State Street said it had discovered the invoicing errors during an internal review of its billing practices. “At the same time, we notified a number of governmental authorities, including the Massachusetts secretary of state, of the error, our intent to repay clients and our commitment to make any necessary changes to our billing practices,” the company said in an April 20 statement.
“We deeply regret this error and have been in discussions with affected clients and with governmental authorities,” it added. “We are committed to compensating affected clients fully, including interest. We have been and are also committed to cooperating with governmental authorities. Given that our internal review is ongoing, we cannot comment any further.”
The incident will presumably not affect State Street’s plans for its GE Asset Management acquisition; it has said the office’s 275 employees will remain in Stamford.