Court Rejects State Street's Settlement Do-Over Request

October 30, 2009 (PLANSPONSOR.com) - A federal judge in New York has turned away a request by lawyers from State Street Bank & Trust to postpone preliminarily approving an $89.75-million settlement in a fiduciary breach case involving mortgage-related investments by State Street's bond funds.

U.S. District Judge Richard Holwell of the U.S. District Court for the Southern District of New York flatly rejected State Street's request to wait until it resolves a parallel investigation by the U.S. Securities and Exchange Commission (SEC) into the same issue involving State Street's subprime mortgage investments.

Securities regulators served State Street with a Wells notice in the SEC matter as part of a procedure to formally notify a potential enforcement target of its status and give it a chance to respond to allegations being made against it (see SEC to Consider SSgA Charges on Fixed Income Fund Activities ).    

State Street's contention, rejected by Holwell, who went on to grant the sought-after preliminary approval, was that members of the class represented in the 2007 lawsuit being settled in Holwell's court couldn't be certain the $90-million payment involved was the best the civil suit plaintiffs would be able to do to recoup more of what they said was a $150-million loss from their State Street bond fund investments.