Regulation  

FCA fines State Street UK £22.9m for mark-up mis-sell

According to a statement from the FCA, the transitions management business “had developed and executed a deliberate strategy to charge clients substantial mark-ups on certain transitions, in addition to the agreed management fee or commission.”

The FCA found that these mark-ups had not been agreed by the clients and were concealed from them.

Between June 2010 and September 2011 the FCA found that State Street UK’s transitions management business deliberately overcharged six clients a total of £12.23m.

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

Tracey McDermott, director of enforcement and financial crime for the FCA, said: “This is another example of a firm that has acted with complete disregard for the interests of its customers. State Street UK allowed a culture to develop in the UK TM business that 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. Its conduct has fallen far short of our expectations. Firms should be in no doubt that the spotlight will remain on wholesale conduct.”

State Street UK agreed to settle at an early stage and qualified for a 30 per cent discount. Were it not for this, the FCA would have imposed a financial penalty of £32,692,800 on the company.

Background

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

Such services may be required when a client needs a large portfolio of securities to be restructured, or when a client decides to change their current asset managers.