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Regulation and Compliance > Federal Regulation > SEC

State Street receives SEC Wells notice on pension soliciting

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(Bloomberg) — State Street Corp. received a Wells notice from the U.S. Securities and Exchange Commission regarding its solicitation of asset servicing business for public pension plans.

The SEC is investigating State Street’s use of lobbyists and consultants, and in at least one instance, political contributions by a consultant during and after a public bidding process, the Boston-based firm said in a regulatory filing on Thursday. The SEC sends a Wells notice to a company or an individual after its staff has determined that sufficient wrongdoing has occurred to warrant civil claims being filed.

“Since 2012, we’ve eliminated the hiring of lobbyists and consultants for our asset servicing dealings with U.S. public retirement plans in support of our sales efforts,” said Anne McNally, a State Street spokeswoman.

Regulators in recent years have cracked down on money managers and intermediaries who use connections with public officials to win business from U.S. public pension systems. In one of the largest “pay-to-play” scandals, former New York State Comptroller Alan Hevesi spent 20 months in prison after pleading guilty to directing $250 million in pension funds to an investment firm in exchange for travel, gifts and more than $500,000 in donations. Private-equity firms including Carlyle Group, Quadrangle Group and Odyssey Investment Partners LLC agreed to pay fines to regulators to settle claims.

In the filing on Thursday, State Street did not disclose which pension funds were involved.

Ohio Subpoenas

In May 2014, the SEC subpoenaed records involving State Street from the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio, according to documents provided in response to public-records requests.

The SEC requested information related to a 2010 request for proposals that led to an agreement, with State Street holding $32 billion for three Ohio pension funds. The agency also sought all documents and communications related to Amer Ahmad, the former Ohio deputy treasurer who pleaded guilty in 2013 to charges from a separate bribery and money-laundering case.

State Street is a custody bank, keeping records, tracking performance and lending securities for institutional investors including mutual funds, pension funds and hedge funds. State Street is also one of the largest providers of exchange-traded funds worldwide and manages investments for individuals and institutions.


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