Reuters: US Dollar Report: UPDATE 1-State Street settlement talks advance with pension fund

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UPDATE 1-State Street settlement talks advance with pension fund Aug 3rd 2012, 22:39 Fri Aug 3, 2012 6:39pm EDT By Tim McLaughlin BOSTON Aug 3 (Reuters) - State Street Corp's settlement talks with an Arkansas pension fund over foreign currency trades have advanced to another level after both sides agreed to meet with a mediator, court records show. State Street, the world's third largest custody bank, has been accused by pension funds in several states of overcharging on forex trades. The bank's forex business is also the subject of U.S. government investigations, including by the Department of Justice, the Department of Labor and the Securities and Exchange Commission, State Street has disclosed. The bank has denied any wrongdoing, but on June 22 met with the $9 billion Arkansas Teacher Retirement System to discuss the possibility of settling a case pending in U.S. District Court in Boston. "After the meeting, the parties agreed to engage in mediation with a mediator to be agreed upon," a status report filed with the court said. During a recent telephone interview with Reuters, State Street Chairman and Chief Executive Jay Hooley declined to discuss the settlement talks. "I can't comment on any specific litigation," Hooley said. "But we think it's important to fight for what's right," he added. Meanwhile, in the Arkansas teacher pension fund case, State Street is accused of marking up a small subset of non-negotiated, or indirect trades, up to 18 times higher than negotiated trades, according to court papers. The pension fund said it thought it was being charged a wholesale rate pegged to what big banks charge each other, known as the interbank rate. While State Street has not conceded any wrongdoing in any of the cases, it has offered customers more transparency on non-negotiated trades. Meanwhile, the pension funds have changed their own behavior by negotiating more trades, compressing State Street's profit margins on that activity. During the first six months of 2012, State Street reported $141 million in revenue from indirect FX trading. That's down nearly 18 percent from the same period in 2011, according to State Street's financial statements. "Some of our clients who relied on our indirect model to execute their FX transactions transitioned to other methods to conduct their FX transactions," State Street said Friday in a filing with the Securities and Exchange Commission. Link this Share this Digg this Email Reprints

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