A jury in the U.S. District Court for the District of Massachusetts convicted Ross McLellan, a former State Street Corp. executive, of engaging in a scheme to defraud customers of State Street’s Transition Management line of business.
McLellan was found guilty of applying secret commissions to billions of dollars of securities trades executed on behalf of these customers, the Securities and Exchange Commission (SEC) announced.
In a statement to PLANSPONSOR, a State Street spokesperson said: “We entered into settlements in 2014 with the UK Financial Conduct Authority and in 2017 with the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) relating to the overcharging of transition management clients in 2010 and 2011. We deeply regret that this occurred, accept responsibility for the actions of our former employees, and since the overcharging was discovered have substantially enhanced our controls. We are fully cooperating with the United States Attorney’s Office for the District of Massachusetts and the Department of Justice in connection with this matter.”
The SEC’s complaint alleges that between February 2010 and September 2011 McLellan led a scheme to add secret commissions to securities trades performed for at least six clients of State Street’s transition management business, which helps institutional clients move their investments between asset managers or otherwise restructure large investment portfolios. The complaint further alleges that these commissions were charged in addition to fees the clients had expressly agreed to pay the bank, and that McLellan took steps to conceal the commissions from the clients and others within State Street.More information about the litigation is here.