SEC Issues Wells Notice To State Street

-based asset management giant State Street Corp. may face civil charges over investments in subprime mortgage-backed securities, the company says. On June 25, Securities and Exchange Commission (SEC) staff notified State Street Bank and Trust Co., State Street's principal subsidiary, that it intends to ask the SEC commissioners for permission to bring a civil enforcement action for possible violations of securities laws. Regulators issued the company a [link=http://phx.corporate-ir.net/phoenix.zhtml?c=78261&p=irol-sec][u]Wells notice[/u][/link] relating 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. According to a [link=http://www.boston.com/business/markets/articles/2009/06/30/state_street_corp_could_face_civil_fraud_charges/][u]Boston Globe[/u][/link] report, the SEC is investigating whether State Street misled investors about the risks involved with the securities. Following the subprime market's 2007 collapse, State Street established a $625 million legal reserve to cover investor claims on losses stemming from the mortgage-backed securities. In an 8-K SEC filing, State Street says it 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. SOURCES: State Street, Bosto

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