Two State Street employees charged in SEC case
SAN FRANCISCO (MarketWatch) — The Securities and Exchange Commission on Thursday charged two employees at State Street Bank and Trust Co. with misleading investors about subprime investments. The SEC alleges that John Flannery and James Hopkins falsely marketed State Street’s Limited Duration Bond Fund as an alternative to a money market fund for certain types of investors but by 2007, the fund was mostly invested in subprime residential mortgage-backed securities and derivatives. “Yet despite this exposure to subprime securities, the fund continued to be described as less risky than a typical money market fund and the extent of its concentration in subprime investments was not disclosed to investors,” the SEC said in a statement. The SEC had earlier this year charged State Street in a related case which the financial firm settled by repaying investors more than $300 million. Flannery no longer works for State Street.
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