State Street has been fined £22.9 million by the Financial Conduct Authority over what the regulator described as a deliberate strategy to over-charge clients, earning the company $20.16 million (£12.25 million).
The fine relates to State Street UK’s Transition Management (TM) division, which added significant undisclosed and unagreed costs to portfolio charges and sought to conceal them from clients.
The FCA described the charges as being ‘at the most serious end of the spectrum’ of regulatory breaches, accounting for up to a quarter of TM’s revenue.
‘The findings we publish today are another example of a firm that has acted with complete disregard for the interests of its customers,’ said FCA director of enforcement Tracy McDermott.
‘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. ‘
While separate from the FCA’s thematic review of portfolio switching and transition management charges, a spokesperson said that the fine was related to a broader focus on portfolio fees.
Between June 2010 and September 2011 the FCA found that TM deliberately inflated its charges for six pension and investment fund clients when helping restructure portfolios.