The US Securities and Exchange Commission (SEC) may file civil charges against State Street Corporation over its methods in soliciting public pension mandates.
In a Wells notice—usually sent after the regulator determines sufficient wrongdoing—the SEC said it intends to claim the Boston-based firm violated securities laws.
“Since 2011, we have enhanced our compliance training and oversight for employees in the US public pension plans sector.” —State Street spokespersonThe company said the SEC’s investigation involves its use of consultants and lobbyists as well as at least one instance of political contributions by a consultant during and after a public bidding process.
The probe, first disclosed in November 2014, is focused on State Street’s relationships with pension plans in two states during a period ending in 2011, the firm said.
A spokesperson for State Street told CIO the firm “eliminated the hiring of consultants and lobbyists for our asset servicing dealings with US public retirement plans in support of our sales efforts” three years ago.
“Since 2011, we have also enhanced our compliance training and oversight for employees in the US public pension plans sector,” she continued.
Furthermore, the spokesperson said State Street has retained 20 of 21 existing public pension fund clients’ asset-servicing contracts over the past two years.
“No person or entity was retained to solicit these businesses on State Street’s behalf and the proposals were evaluated independently on their merits,” she added.
State Street confirmed it would submit a response to the Wells notice to the SEC before the regulator decides whether or not an enforcement action is warranted.
In a quarterly filing last November, the firm declared unfavorable outcomes from the investigation could cause “a material adverse effect on our business and reputation.”
Related: State Street Under Investigation for Public Pension Pitch Tactics