Brokerage Is Fined Over Bond Trading
Financial regulator NASD on Tuesday fined a State Street Corp. unit $1.4 million because it failed to properly report bond trades totaling $5 billion during a 17-month period.
Calling the matter a “serious offense” that might have hurt other investors, NASD said State Street’s Global Markets unit did not report to regulators the bulk of corporate bond and municipal bond trading transactions made between July 2003 and December 2004.
Brokerage firms must report price and volume data on all corporate bond transactions to NASD’s Trade Reporting and Compliance Engine. All municipal bond trades must be reported to the Municipal Securities Rulemaking Board.
NASD, formerly known as the National Assn. of Securities Dealers, said the errors occurred because State Street employees did not make sure that all transactions at new accounts would be properly reported.
Boston-based State Street, one of the world’s biggest providers of processing and custody services to the mutual fund industry and a huge institutional money manager, neither admitted nor denied the charges.
The company, however, agreed to pay the fine, NASD’s biggest ever against a single firm for bond trade reporting violations.
“This was an unfortunate trade reporting processing error that was identified and corrected to ensure it does not happen again,” State Street spokeswoman Carolyn Cichon said.
NASD Vice Chairman Mary Schapiro said the reporting failures “deprived the markets, investors and regulators of critical information, and impaired the integrity of bond trading data that market participants rely upon to make informed investment decisions.”
State Street is the latest company to be punished for fixed-income trading reporting violations. In June NASD fined 20 securities firms $1.65 million for inaccurate municipal bond trade reporting.
Between July 2003 and December 2004, NASD said, State Street Global Markets failed to report 14,073, or 89%, of its self-cleared corporate bond transactions. It also failed to report 380, or 79%, of its self-cleared municipal bond transactions.
State Street said none of its customers were hurt by the failures. The company said it had overhauled its training processes and procedures to avoid such errors in the future.
State Street shares fell 38 cents, to $57.80.
