UNITED STATES - The compensation paid to investors with State Street is under the spotlight again in the wake of the credit crunch and Lehman Brothers collapse, as the firm has agreed a deal with US regulatory authorities to set aside compensation regarding fixed income strategies.
A statement issued by the firm last week said it had agreed a settlement with the SEC as well as Massachusetts legal officials to put aside a further $313m into a "fair fund" for investors caught out by the lack of disclosures around "certain active fixed-income strategies…during 2007 and in earlier periods".
State Street had sought to prepare somewhat for the prospect of compensation claims, as it created a $618m compensation fighting fund set up in 2007 to deal with anticipated legal claims, and this was topped up again in November 2009. (See earlier IPE story: State Street ups fund to fight investor claims)
Officials at the firm refused to disclose which specific strategies they relate to but confirmed the investors affected are US only.
It is understood the investments held sub-prime mortgages but investors were not informed of the risks.
Investors outside of the US have been affected by other strategies employed, however, as Dutch pension fund OPG recently settled a claim against State Street concerning investments exposing the firm to the Lehman Brothers collapse and the lack of information supplied. (See earlier IPE story: OPG settles claim with SSGA)
PMA, another Dutch pension fund, is also pursuing legal action against SSGA for similar reasons, as is the Dutch pension fund of British American Tobacco (BAT. (See earlier IPE stories: PMA scheme pulls back to grant full indexation and BAT is latest to sue State Street)
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