8-KRegulation FD

STATE STREET CORP 8-K Report, Regulation FD Disclosure (Dec 17, 2015)

Filed December 17, 2015For Securities:STTSTT-PG

Summary

State Street Corporation (STT) has disclosed in an 8-K filing that it initiated a review into how certain expenses have been invoiced to asset servicing clients, primarily in the United States. Based on preliminary findings, the company believes it has incorrectly invoiced some clients over an 18-year period. State Street deeply regrets this issue and has committed to fully compensating affected clients, including interest, and improving its billing practices once the review is complete. The preliminary assessment suggests that expenses potentially incorrectly invoiced could amount to $200 million or more over the 18-year period, out of approximately $400 million invoiced in the reviewed categories during that time. While the final reimbursement amount is yet to be determined and could differ materially, these expenses represented about 0.7% of State Street's total asset servicing fee revenue in 2014. The company expects to reflect obligations related to this review in its financial statements as of December 31, 2015, and has notified governmental authorities.

Key Highlights

  • 1State Street initiated a review into its expense invoicing practices for asset servicing clients.
  • 2Preliminary findings indicate that certain expenses have been incorrectly invoiced, primarily in the U.S.
  • 3The company estimates that $200 million or more of expenses may have been incorrectly invoiced over an 18-year period.
  • 4State Street has committed to fully compensating affected clients with interest.
  • 5The company expects to reflect financial obligations related to this review in its Q4 2015 financial statements.
  • 6Governmental authorities have been notified, and regulatory inquiries and litigation are possible outcomes.
  • 7Additional details will be provided in the Q4 2015 earnings release on January 27, 2016.

Frequently Asked Questions

State Street Corporation disclosed that it is undertaking a review into its past practices of invoicing certain expenses to its asset servicing clients. Preliminary results suggest that some of these expenses were incorrectly invoiced over an 18-year period.

Based on a preliminary assessment, State Street estimates that $200 million or more of expenses may have been incorrectly invoiced over the 18-year period. The total amount to be reimbursed will be determined upon completion of the review and could differ materially.

State Street has stated its deep regret for the matter and has committed to fully compensate affected clients, including interest, once the review is concluded. They also plan to implement necessary improvements to their billing processes.

The company has notified governmental authorities and may face regulatory inquiries, litigation, and potential reputational harm. These outcomes could have a material adverse effect on State Street's consolidated results of operations and reputation.