Fundsters, State Street might have overcharged you ... for things like office supplies, but not for custody or asset management.

Joseph L. Hooley State Street Corporation Chairman, Chief Executive Officer

This morning the publicly-traded, Boston-based, giant custodial bank confirms that it is telling its asset servicing clients that, over an 18-year period, it "incorrectly invoiced certain expenses," to the tune of about $200 million or more. The State Street team is examining about $400 million in expenses invoiced to clients over that time period, and State Street promises to "compensate clients fully, including interest," once the review is complete. State Street's asset servicing clients are institutional investors (including asset managers and asset owners, like mutual fund shops and the funds they manage).

Anne McNally, a spokeswoman for State Street, tells MFWire that the invoicing issue was for out of pocket expenses, like forms and supplies or postage, and not for service fees or for custody. And she says it wasn't specifically about State Street's own mutual fund business at SSgA [profile]:

Our review has not detected separate billing issues within State Street Global Advisors (our asset management arm). Certain SSGA clients, including our registered funds, use State Street's custody services. Once the review of the specific expense categories in questions is completed, State Street will fully compensate these clients for any errors, including interest.

There's no word yet on what caused the incorrect invoicing.

"We're in the preliminary stages of our review and therefore are not in a position to answer that question," McNally states.

State Street promises to publicly reveal more about the invoicing issue in its Q4 2015 earnings release, slated for January 27. The company estimates that "the categories of expenses under review" amounted to a tiny fraction, about 0.7 percent, of its total $5.1 billion in asset servicing fee revenue in fiscal 2014.

"We deeply regret this matter and are in the process of notifying affected clients. We are committed at the conclusion of the review to compensate affected clients fully, including interest, and make any required changes to our billing practices," McNally states. "Importantly, this is an issue that we identified and one that we are committed to resolving."

As of September 30, State Street had $27.3 trillion in assets under custody and administration, as well $2.2 trillion in AUM. 

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