“The SEC is conducting an inquiry into the management of our securities lending program and disclosures made to … participants,” State Street said in a regulatory filing, according to the Boston Business Journal. State Street said it is cooperating with the investigation.
The news report said, in 2008, securities finance generated $1.23 billion in revenue for StateStreet, but during the early weeks of the 2008 credit crisis, the collateral backing loaned securities fell below industry benchmarks, and when some State Street clients tried to execute redemptions, they encountered restrictions.
Some clients filed lawsuits over the firm’s securities lending practices (see Charges against State Street over Securities Lending Program Dismissed).Last July, State Street announced a one-time $330 million cash contribution to certain common and collective trust funds managed by State Street Global Advisors (SSgA) that engage in securities lending (see State Street Announces Sec Lending Adjustments).
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