State Street Faces New Problems

On June 9, State Street Corp. repaid the reasury Department $2 billion that it received through the Troubled Asset Relief Program.

Now the bank is making headlines again, but for very different reasons.

Early this morning State Street Corp. filed a document with the Securities and Exchange Commission which disclosed that last Thursday the SEC served it with a Wells Notice.

The notice was delivered to State Street Bank and Trust Co., whose State Street Global Advisors unit as been hit numerous suits related to bond funds that suffered heavy losses because of investments in securities backed by subprime mortgages.

The filing adds:

"The notice relates to an ongoing SEC investigation into disclosures and management by State Street Global Advisors of certain active fixed-income strategies during 2007 and prior periods. The Wells notice informs State Street that the SEC staff intends to ask the SEC Commissioners for permission to bring a civil enforcement action for possible violations of the securities laws. State Street has been cooperating with the SEC in this inquiry and continues to cooperate with the Massachusetts Secretary of State, the Massachusetts Attorney General and other regulators in their related inquiries. Under the process established by the SEC, State Street will have an opportunity to present its perspective on these issues before any formal decision is made on an enforcement proceeding."

We will follow the matter and report on additional developments.