Galvin: State Street overbilled clients

BOSTON – The secretary of the commonwealth last week charged State Street Global Marks LLC with violating the state securities act, alleging the company for years has overcharged custodial clients by its holding company: State Street Corp.
The secretary, William F. Galvin, alleges State Street Corp., which owns 75 percent or more of State Street Global Markets, commonly charged out-of-pocket expenses to custodial clients, including pension fund, mutual fund, hedge fund and institutional investors, according to the complaint. Some expenses were mislabeled and contained concealed markups reaching 1,900 percent actual value, Galvin alleges.
“A pattern of overcharging as shown in this and other regulatory actions is unacceptable in a company that controls a state-registered broker-dealer,” Galvin said. “My office has the authority to proceed against a registered broker-dealer if its control person has engaged in dishonest and unethical activity in the securities business. This is exactly what we have here, and public policy dictates we act to stop it.”
Galvin’s office is seeking a censure, an administrative fine and other actions, including client reimbursement.
State Street in December announced its expenses may have been incorrectly invoiced during a-year-and-a-half-long period. Earlier this month, two former State Street executives were indicted by the U.S. Department of Justice in Boston, charged with conspiring to commit securities and wire fraud in adding secret commissions to billions of dollars in securities trades, according to a press release.

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