By Angela Chen
State Street Corp. warned Thursday that the U.S. Securities and
Exchange Commission may bring a civil enforcement action accusing
the bank of violating securities law tied to its use of
consultants.
According to a regulatory filing, the "Wells" notice is related
to a previously disclosed SEC investigation into the bank's use of
consultants and lobbyists and, in at least one instance, to
political contributions by consultants during a period that ended
in 2011. Specifically, the investigation is related to State
Street's solicitation of asset servicing business for its public
retirement plans.
Receiving a Wells notice doesn't guarantee SEC action. The Wall
Street Journal reported in 2013 that during the two-year period
ended September 2012 about 20% of people who received the warnings
ended up not facing charges.
The Boston-based bank had warned in May that it may be required
by a written agreement to improve its compliance procedures after
deficiencies were found related to the Bank Secrecy Act,
anti-money-laundering regulations and U.S. economic sanctions
regulations. It had added a $150 million charge to its legal
reserves for resolving outstanding claims related to
foreign-exchange activities.
Earlier this month, the bank was ordered by regulators to revamp
its compliance programs after deficiencies were found related to
internal controls, customer due-diligence procedures and
transaction monitoring.
State Street said then that it would bring on an independent
firm to review account and transaction data to see if it properly
managed suspicious activity. At the time, spokeswoman for the bank
said further regulatory action could be taken if it were to fail to
address the identified concerns.
State Street intends to submit a response to the SEC.
Shares have increased 1.8% so far this year through Thursday's
close and were unchanged after hours.
Write to Angela Chen at angela.chen@dowjones.com
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