On Wednesday, Massachusetts' top securities regulator alleged a unit of custody bank State Street Corp habitually of overcharging clients for items such as messaging services.
Reuters reported that Secretary of Commonwealth William Galvin said in a statement that State Street Global Markets has engaged in a legal pattern of overbilling its customers. Galvin noted in an administrative complaint that the company often labeled the charges for secure electronic messages, also known as SWIFT messages, as out of the pocket expenses that contained hidden markups of up to a mind-boggling 1,900 percent.
According to the Chicago Tribune, the company has run afoul of regulators in recent years. In 2014, the FCA claimed that State Street has developed and executed an intentional strategy to charge concealed payments at a unit which helps institutions restructure their own investments.
State Street is a custody bank, which tracks performance, keeps records, and lends securities for institutional investors including hedge funds, pension funds, and mutual funds. The bank is also considered to be one of the giant providers of exchange funds internationally and manages investments of institutions and individuals.
For the past few years, it has encountered several regulatory investigations on matters including soliciting business from public pension plans and foreign-exchange trading.
Anne McNally said in a statement via email that State Street claimed it discovered invoice errors on several expenses and notified officials including the office of Galvin, reports Jutia Group. The company said it will pay customers and will reform its billing practices as required.
The company has been in negotiations with customers over the matter, together with the government authorities, also pledging to cooperate. The complaint is the latest regulatory action to evaluate claims of overbilling at State Street which was based in Boston.
In 2014, State Street agreed to pay a fine of $32.91 million dollars to the United Kingdom Financial Conduct Authority for charging customers with hidden markups, which the customers claimed they had not agreed to pay.
