8-KOther Events

STATE STREET CORP 8-K Report, Corporate Update (Feb 4, 2010)

Filed February 4, 2010For Securities:STTSTT-PG

Summary

State Street Corporation (STT) filed an 8-K on February 4, 2010, to announce settlements with the Securities and Exchange Commission (SEC) and the Commonwealth of Massachusetts. These settlements resolve investigations into losses and disclosure issues related to certain active fixed-income strategies managed by State Street Global Advisors in 2007 and prior. Importantly, State Street has not admitted or denied any allegations in reaching these agreements. The financial impact of these settlements is significant, with State Street agreeing to establish a $313 million fair fund for the SEC settlement. This includes a $50 million fine and approximately $8 million in disgorgement of fees and interest. When combined with prior client settlements totaling approximately $350 million, the total compensation to investors will be around $663 million. The company also agreed to pay $10 million each to the Massachusetts Secretary of State and the Massachusetts Attorney General. State Street has indicated that its previously established legal reserve will fully cover these settlement costs.

Key Highlights

  • 1State Street Corporation has reached settlements with the SEC and Massachusetts regulators concerning past fixed-income strategy issues.
  • 2The company has not admitted or denied regulatory allegations.
  • 3A $313 million fair fund will be established for the SEC settlement, including a $50 million fine and ~$8 million in disgorgement.
  • 4Total investor compensation, including prior client settlements, will approximate $663 million.
  • 5State Street will pay $10 million each to the Massachusetts Secretary of State and Attorney General.
  • 6Previously established legal reserves are expected to fully cover all settlement costs.

Frequently Asked Questions

The investigations by the SEC and Massachusetts regulators concern losses and disclosure issues related to certain active fixed-income strategies managed by State Street Global Advisors during 2007 and earlier periods.

No, in reaching these settlements, State Street has not admitted or denied the allegations made by the regulators.

The SEC settlement involves a $313 million fair fund (including a $50 million fine and ~$8 million disgorgement). Additionally, State Street will pay $10 million each to two Massachusetts state entities. Combined with prior client settlements, the total investor compensation is expected to be approximately $663 million. The company stated that its existing legal reserve will cover these costs.

The investigations relate to losses and disclosures concerning fixed-income strategies managed by State Street Global Advisors in 2007 and earlier periods.