In early 2014, State Street were found guilty of over-charging a variety of pension funds and were fined by the FCA. Funds which were stolen from included the staff scheme for Sainsburys and the Royal Mail pension scheme. You can read about it in my blogs at the time – what do you do when the lights go out and too big to worry about- what should we do about State Street.
State Street now have three big UK DC clients- it provides underlying investment administration to NEST, it manages the bulk of funds at Scottish Widows and it is lead fund manager at People’s.
In February 2014 I wrote to Toby Strauss, Scottish Widows’ CEO (he resigned yesterday) and asked if Scottish Widows would make a statement on State Street and would , on behalf of its customers, take action to censure the global American investment bank. I have never received an answer (and since he is leaving I expect I never will).
Logically, I should take the matter to Babloo Ramamurthy who since February 2015 has been Chairman of Scottish Widow’s Independent Governance Committee.
Babloo was till 2011 on the Global Steering Group at Towers Watson so is used to big company governance.
However, I doubt that a direct approach would prove any more effective as Babloo is also Independent Chairman and Non Executive Director of B&CE which owns the People’s Pension.
And since NEST has such a close relationship to State Street, I doubt that anyone’s given State Street’s little larceny a moment’s thought. I met with Laurence Churchill , Chairman of NESt in March 2014 to ask him the same question I’d asked Toby Strauss, he laughed and looked at me as if I was the village idiot.
“State Street have been slapped on the wrists, what’s it to do with you”
There is one thing to have a governance policy, another to use it effectively.
I haven’t for gotten and I won’t let it lie!
At the Manchester FT Adviser Forum last week I was asked what the financial services industry could do to restore confidence in pensions. My answer, in a public meeting, was that we should make sure that where malfeasance has been discovered, sanctions should be put in place against the malefactor.
State Street have had no commercial sanctions put against them since the FCA judgement and they have continued with Business as Usual. In my answer I made mention of State Street as my example.
Did the Forex theft even get mentioned?
But back to Peoples Pension. This is an organisation that has a strong moral compass. Its Trustee board is chaired by Steve Delo of Pan Trustees , its executive is headed by Patrick Heath-Lay and its management team is conscientious , competent and effective.
I doubt that anyone involved in the decision to appoint State Street, had consideration for the FCA judgement in 2014 or looked into the report that the FCA produced on the behaviour of State Street towards the pension funds it stole from.
I doubt that anyone has commented on the potential conflicts for Babloo as he now controls relationships with two out of State Street’s three major DC clients in this country.
There is nowhere for these things to be said. The Governance is in place, the “i”s dotted and the “t”s crossed. People’s and Scottish Widows and NEST are now providing State Street with an ideal marketing platform.
It isn’t really the done thing to have a go at Global Investment Banks. You don’t get to sit at the top-table if you do.
So these conversations have to go on in private between those in the know. with the odd snigger and knowing glance.
I guess this is how VW was able to get away with it for so long.