Compliance February 28, 2011

State Street SecLending Program Remains under Scrutiny

State Street Corp. has reported that the Securities and Exchange Commission (SEC) is continuing its investigation of the Boston-based company’s stock lending program.
Reported by

“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 that 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 faced 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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