State Street Corporation (company that owns Currenex) is being now investigated by the SEC with regards to its foreign exchange pricing. The issue at hand is the foreign exchange pricing that State Street used when providing custodial services to several government pension plans. State Street has previously settled with the Washington State Investment Board for $11.7 million. Claims against it from Arkansas Teacher Retirement System and the California attorney generals office are still ongoing. These are similar to suits against Bank of New York Mellon Corp. Because of the OTC nature of the currency market, I think it is important to choose a counter party that is regulated, credible and respected.
State Street spokeswoman, Hannah Grove said “State Street is responding to inquiries from various regulatory bodies regarding its foreign-exchange practices. We will cooperate fully with the SEC in its inquiry and continue to defend ourselves against any allegations of wrongdoing.”
According to their latest quarterly public filing with the SEC, State Street added this note:
“As previously reported, the Attorney General of the State of California has commenced an action under the California False Claims Act and California Business and Professional Code related to services State Street provides to California state pension plans. The California Attorney General asserts that the pricing of certain foreign exchange transactions for these pension plans was governed by the custody contracts for these plans and that our pricing was not consistent with the terms of those contracts and related disclosures to the plans, and that, as a result, State Street made false claims and engaged in unfair competition. The Attorney General asserts actual damages of $56 million for periods from 2001 to 2007 and seeks additional penalties. We provide custody and principal foreign exchange services to government pension plans in other jurisdictions, and attorneys general from a number of these other jurisdictions, as well as U.S. Attorney’s offices, the SEC and other regulators, have made inquiries or issued subpoenas concerning our foreign exchange pricing.”
Grab your latest copy of the Forex Magnates Retail Forex Industry Report for Q1 2011.
Obviously its not ok what STT did – but i keep wondering why the pension firms did take so long to catch up on it. I mean, its not exactly difficlut to vet a price of a fx transaction, and this stuff did go on for years..