State Street investigated for alleged overcharging
UK City watchdog probes Irish deal
STATE Street is being investigated over allegations that it overcharged the National Pension Reserve Fund on services it carried out for it.
London's new City regulation watchdog, the FCA, is carrying out an enquiry in the UK and the gardai have been advised of the issue here at home.
The extent of the alleged fee overcharging isn't known, but the Ireland and US-based financial giant has set up an €8m reserve to deal with any cost or fine resulting from any negative finding from the investigation.
The British regulator didn't comment but the National Treasury Management Agency, which manages the Irish pension reserve monies, confirmed that the inquiry was taking place.
A spokesman for the National Treasury Management Agency said it had advised the gardai and the regulator in Britain regarding an issue that arose some time in 2011 involving State Street's UK transition management business and what it calls "unauthorised commissions" to the value of €3.2m, which were levied on the National Pension Reserve Fund in respect of a piece of work undertaken by State Street for the fund.
National Treasury Management Agency boss John Corrigan told an Oireachtas committee last year that the agency was taking the matter extremely seriously.
The National Treasury Management Agency said it was awaiting the outcome of an investigation into the matter by the British authorities and that it would participate in that inquiry if asked to.
While the fund has been reimbursed and is not out of pocket, the National Treasury Management Agency said it may seek compensation on the matter depending on the outcome of the investigation.
The National Pension Reserve Fund has suspended State Street from its panel of transition management firms. It has "reserved its position", it says, regarding other State Street businesses – in particular State Street Global Advisors, the separate investment management business – pending the outcome of investigations.
State Street's annual report for 2012 said that in 2011, "We identified a limited number of instances in which clients of our UK transition management businesses had been intentionally charged amounts in excess of the contractual terms."
It conducted an investigation into this, it said, and sought external counsel and accounting firm advice. It said it "notified and reimbursed or offered to reimburse" the clients affected.
It added that it had put aside a reserve of almost €8m for costs and potential financial penalty.
State Street didn't respond when contacted on Friday.