Money corrupts, is State Street corrupted absolutely?

state street

Is there no end to the  greed within State Street’s global custody division?

Two former executives at State Street have been charged by US officials for their part in a scheme involving secret commissions within its transition management business.

Ross McLellan and Edward Pennings, both former executives at the custody bank  were charged in a five-count indictment of securities fraud and wire fraud.

It is alleged the pair conspired to add secret commissions to fixed income and equity trades executed for at least six clients of the bank’s transition management business, between February 2010 and September 2011.

US Attorney Ortiz said in a statement their “secret conversations” and “backdoor plotting” had been laid bare. 

She said: “The defendants never thought anyone would hear those conversations – conversations in which they plotted to overcharge their clients by millions of dollars, and to hide their tracks. 

“Bankers who abuse their clients’ trust in this way must be held accountable.”

The indictment comes two years after State Street’s UK transition management business was fined £22.9 million by the Financial Conduct Authority (FCA), for the scheme involving McLellan and Pennings.

Director of enforcement at the FCA, Tracey McDermott, said at the time: “State Street UK allowed a culture to develop in the UK transition management business which prioritised revenue generation over the interests of its customers.

“State Street UK’s significant failings in culture and controls allowed deliberate overcharging to take place and to continue undetected.” 

The investigation is on going and being carried out by the Federal Bureau of Investigation.

The charge of the two former employees is the latest scandal facing State Street. In January this year, State Street agreed to pay the US Securities and Exchange Commission (SEC) $12 million to settle charges of a pay-to-play scheme to win custody mandates of Ohio pension funds. 

State Street – the people who administer your investments  if you pension is  NEST

State Street – the people who manage your money if your pension is Scottish Widows or People’s pension.

State Street – whose people were caught stealing money from the Sainsburys and Royal Mail pension scheme (and a bunch more).


Every basis point helps.


Small fractions of money are measure in basis points, one basis point is one hundredth of one hundredth.

The temptation to steal a very small fraction of a very large amount of money is obvious. If you have hundreds of  thousands of people to steal from and no one loses more than a few quid – where’s the harm in that?

And if you take the money when it’s on the move (transitioning), no one’s going to notice, just like no one notices if you knick stuff in an office move.

But this is precisely why the standards of behaviour we demand from institutions has to be impeccable. If State Street cannot be trusted , can anybody?

Quite rightly, other custodians who have impeccable records of probity are indignant that State Street can carry on robbing and yet get appointed to some of the biggest workplace pension  mandates this country has ever seen.


State Street and the People’s Pension

I am angry because the people I trust my money to and my customers money to, continue to use State Street without a second thought to whether State Street are fit and proper.

Here’s some exerts from the B&CE press release announcing the move from L&G to State Street as asset manager

Steve Delo, Trustee Chair of The People’s Pension, said:

“We are delighted to appoint SSGA to provide the investment platform for The People’s Pension. As a Trustee Board we are always reviewing our partners and suppliers to ensure that we are delivering the best value for our 1.6 million members and are looking forward to our future partnership with SSGA.”

Patrick Heath-Lay, Chief Executive Officer of B&CE, said:

“We have been working with The Trustee Board in undertaking a wide-ranging review of investment and at retirement options for members of The People’s Pension in light of new at retirement flexibilities introduced earlier this year and the changing needs of the market.

“We have some exciting plans for the future and the move to SSGA is the first step in bringing those plans to life.”

Nigel Aston, Head of European Defined Contribution at State Street Global Advisors, said:

“We are really excited and delighted to be appointed by The People’s Pension at such an exciting and revolutionary time for the pensions industry following the introduction of the new retirement freedoms.

“The People’s Pension is an important and valued partner with a shared goal to support pension savers in achieving the best possible outcomes in retirement.”

I know and like Steve, Patrick and Nigel but the deal is not about State Street’s capacity to do what L&G cannot. It is simply down to State Street’s cut-price service that nets B&CE an extra basis point of margin from the 50bps it charges People’s members.


NEST and State Street

Here is how NEST advertise their relationship with State Street.

Fund administration

Our fund administration partner is State Street Corporation.

State Street Corporation operates in 25 countries around the world.

The fund administration contract was signed in November 2010 for 10 years, with a possible extension of up to five years.

Find out more details about State Street Corporation in our State Street factsheet (PDF) .

NEST also uses State Street Global Advisers to manage the Gilts within its investment portfolio.

There is no especial reason for State Street to do this work, “other providers” as they say “are available”.

 We’re all in it together.

Of course the governance standards of NEST and People’s pension are supposed to be impeccable. The Pension Regulator promotes both on its website

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NEST is the Government’s own scheme. Around 1 in 2 employers are currently choosing a workplace pension operated by these two excellent pension schemes.

If we are serious about Governance, we need to do more than dish out fines to State Street. We need to stop doing business with them.

I don’t suppose that the latest scandals to hit State Street are enough to trigger break clauses in the NEST and B&CE agreements. What is done is done.

But if the governance infrastructure we are building around occupational and workplace pensions is to have teeth, trustees and IGC committees are going to have to start saying no.

We are all in this together and when one supplier (State Street) is constantly found cheating, stealing and lying, they need to be shown the red card.

Isn’t that what pension governance is all about?

state street



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Money corrupts, is State Street corrupted absolutely?

  1. joe says:

    I was enrolled without my permission into nest and six months later they will not return my money plus I am getting nuisance calls from companies wanting to “help me ” spend my lump sum which I don’t have -so they are selling my details. It gets worse my partner has now been enrolled without her permission by her employer and they are now taking money out of her pay . How can we stop this rip off -they just send me patronising e-mails and letters and sell my details!!

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