Financial Regulatory Forum

State Street says U.S. requested info on funds

February 23, 2010

   By Svea Herbst-Bayliss
   BOSTON, Feb 22 (Reuters) – State Street Corp <STT.N> reported on Monday that federal securities regulators and federal prosecutors had asked it to supply information about several of its funds.
   The requests were made public only a few weeks after State Street, the world’s second largest institutional money manager with $1.9 trillion in assets under management, settled other federal and state charges related to investments in sub-prime mortgages.
   In the filing, State Street said the U.S. Attorney’s office in Boston has requested information in connection with State Street’s active fixed income strategies.
   The company did not say when the federal prosecutor asked for the information or give any other details about what may happen next.
   In the same filing, State Street also said the U.S. Securities and Exchange Commission had requested information regarding two registered funds that invested in sub-prime securities.
   It also did not say when the U.S. financial regulator asked for the information.
   The company said these funds were not covered by the settlement announced earlier this month and added that the SEC has “declined to advise us of the status of its inquiry.”
   Earlier this month the company agreed to reimburse investors over $300 million to settle federal and state charges that the company had misled clients about its investments in sub-prime mortgages.
   The commission charged that the Boston-based company’s investment arm had selectively disclosed information to investors in its Limited Duration Bond Fund about the portfolio’s plunging returns in 2007.
   The fund, which had managed $1.4 billion, was aimed at pension funds and other investors who wanted slightly better returns than what money market funds were paying, but with only slightly more risk. The fund’s returns tumbled about 37 percent during the first three weeks of August 2007.
   State Street, an icon in the investment industry since its founding 218 years ago, had already paid out about $350 million to settle lawsuits brought by private investors.
   The payments under the settlement announced earlier in the month will be covered by State Street’s legal reserve fund, which it originally set up in 2007 and stocked up last year.
   In the regulatory filing made on Monday, State Street sad that of the seven seven lawsuits filed, the company settled three, including an $89.75 million Employee Retirement Income Security Act (ERISA) class action settlement. (Reporting by Svea Herbst-Bayliss; Editing by Richard Chang) ((Svea.Herbst@Reuters.com; +1 617 856 4331; Reuters Messaging: svea.herbst.reuters.com@reuters.net)) Keywords: STATESTREET/ 
  
Tuesday, 23 February 2010 00:55:21RTRS [nN22221054] {C}ENDS

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