The Securities and Exchange Commission is accusing two employees of the Boston bank State Street with fibbing to shareholder about the company’s subprime exposure.
The SEC says that ex-chief investment officer John P. Flannery and current head of product engineering for North America James D. Hopkins told clients that State Street’s Limited Duration Bond Fund was akin to a money market fund. Only problem was that by 2007 the fund was almost entirely invested in subprime mortgage-backed securities.
“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 February, the SEC took similar action against State Street itself, and State Street settled the case by agreeing to pay $300 million to investors in the fund.