In recent news, State Street Corporation has agreed to pay a whopping $115 million fine to settle charges of improper handling of clients` assets. While this may seem like a hefty sum, it pales in comparison to the potential consequences of a criminal indictment. However, the company managed to avoid this fate by entering into a deferred prosecution agreement (DPA).
So, what exactly is a DPA? Essentially, it is a legal agreement between a prosecutor and a defendant that allows the latter to avoid criminal charges by meeting certain requirements. In this case, State Street agreed to admit to the facts outlined by the government, enhance its compliance and risk management programs, and pay the substantial fine as part of the DPA.
The charges against State Street involved its handling of transition management services for clients. This type of service involves the temporary transfer of assets from one investment manager to another, with the goal of minimizing disruption and maximizing returns. According to the government, State Street overcharged its clients for these services and failed to disclose certain information related to pricing and compensation.
The DPA will allow State Street to resolve these allegations without the risk of a criminal indictment, which could have had significant financial and reputational consequences. However, it is important to note that the company is not completely off the hook. If it fails to meet the requirements outlined in the DPA, it could still face criminal charges.
Overall, the deferred prosecution agreement reached between State Street and the government highlights the importance of transparency and accountability in the financial industry. Companies must take responsibility for their actions and work to rebuild trust with their clients and the public. By entering into a DPA, State Street has taken an important step towards this goal.
