State Street Informing Clients About Fee Review

The custodian believes it has incorrectly invoiced some asset servicing clients.

State Street Corporation announced it is informing clients about a review it has initiated into the manner in which it invoiced certain expenses to asset servicing clients.

The review, in its preliminary stages, addresses the amounts invoiced for specific categories of expenses. A spokesperson told PLANSPONSOR since the firm is in the preliminary stages of the review, it is unable to estimate how many employer-sponsored retirement plan clients, if any, are affected. However, the company said the clients affected are primarily in the United States.

Based upon State Street’s preliminary assessment, over the 18-year period for which it has accessible records, approximately $200 million or more of the total of $400 million of expenses falling within the categories being reviewed may have been incorrectly invoiced.  Annual amounts invoiced for these expenses ranged from approximately $9 million in the early years to approximately $36 million in 2014. In fiscal year 2014, the categories of expenses under review represented approximately 0.7% of State Street’s total asset servicing fee revenue of $5.1 billion.

In a statement, State Street said, “We deeply regret this matter and are in the process of notifying affected clients. We are committed at the conclusion of the review to compensate affected clients fully, including interest, and make any required changes to our billing practices. Importantly, this is an issue that we identified and one that we are committed to resolving.”

The actual amount to be reimbursed to clients will not be known until the review is completed, and that amount could differ materially from the company’s preliminary assessment. State Street said it will provide additional information about this matter in its scheduled fourth quarter 2015 earnings release and call on January 27, 2016.