View more on these topics

FCA fines State Street UK £23m for client overcharging

The FCA has fined State Street UK £22.9m for deliberately overcharging clients substantial mark-ups on changes to asset portfolios.

The regulator says the firm’s transitions management business developed and executed a deliberate strategy to charge clients mark-ups on certain transitions, in addition to the agreed management fee or commission. These mark-ups had not been agreed by the clients and were concealed from them.

TM is a service provided to clients to support structural changes to asset portfolios with the intention of managing risk and increasing returns.

State Street UK’s clients include large investment management firms and pension funds holding the funds and savings of retail investors.

Between June 2010 and September 2011 the FCA found that State Street UK’s TM business deliberately overcharged six clients a total of $20.2m (£12.3m), which accounted for over a quarter of TM’s revenue, in order to “meet its challenging revenue targets”. 

FCA director of enforcement and financial crime Tracey McDermott says the firm acted “with complete disregard for the interests of its customers”.

She says: “State Street UK allowed a culture to develop in the UK TM business which prioritised revenue generation over the interests of its customers.

“State Street UK’s significant failings in culture and controls allowed deliberate overcharging to take place and to continue undetected.”

According to reports at the time, State Street dismissed two executives in 2011 in relation to transition fee overcharging.

One of the executives, Edward Pennings, took the firm to an employment tribunal, claiming he had been made a scapegoat to protect State Street’s reputation, but his claim was thrown out in December 2012.

Philip J Milton & Company managing director Philip Milton says: “It is surprising to hear of such unethical practices at a firm like this. Its reputation is likely to suffer substantially.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com