The Securities and Exchange Commission today announced that State Street has agreed to pay more than $35 million to settle charges that it fraudulently charged secret markups for transition management services and separately omitted material information about the operation of its platform for trading U.S. Treasury securities.

An SEC order finds that State Street’s scheme to overcharge transition management customers generated approximately $20 million in improper revenue for the firm.  State Street used false trading statements, pre-trade estimates, and post-trade reports to misrepresent its compensation on various transactions, especially purchases and sales of bonds and other securities that trade outside large transparent markets.  When one customer detected some hidden markups and confronted State Street employees, they falsely called it a “fat finger error” and “inadvertent commissions” in order to conceal the scheme.

“Agreeing to a fee arrangement and then secretly tucking in hidden, unauthorized markups is fraudulent mistreatment of customers,” said Paul G. Levenson, Director of the SEC’s Boston Regional Office that investigated the overcharges.