State Street Corporation, known as State Street, is a US-based international financial services
holding company.
State Street was founded in 1792 and is the second oldest financial institution in the
United States.
The company’s headquarters are at One Lincoln Street in Boston and it has offices in 25
countries around the world.
State Street is organized into three main divisions.
The Global Services business is a custodian bank with $28 trillion of assets under custody
and administration.
The Global Advisors business provides investment management services and has $2.3 trillion
of assets under management.
The Global Markets business offers investment research and trading services to institutional
investors.
History State Street’s past can be dated back to
the founding years of Boston’s banking industry.
In 1792 the Union Bank became the third bank to be chartered in Boston and was located
at the corner of State and Exchange Streets.
State Street was known as the “Great Street to the Sea” as Boston became a flourishing
maritime capital.
The clipper in State Street’s logo today reflects this period.
In 1865 the Union Bank received a national charter and became the National Union Bank
of Boston.
State Street Deposit & Trust Co opened alongside National Union in 1891.
It became the custodian of the first US mutual fund in 1924, the Massachusetts Investors
Trust.
State Street and National Union merged in 1925.
State Street’s growth during the mid-1900s was fuelled by mergers and acquisitions.
It merged with the Second National Bank in 1955 and with the Rockland-Atlas National
Bank in 1961.
William Edgerly gained control in 1975 and shifted the company’s strategy from commercial
banking to investments and securities processing.
The company began investing heavily in technologies for securities management and custodian processing.
It was helped by a partial acquisition of Boston Financial Data Services in 1973.
More than 100 top staff from IBM were headhunted by State Street as it set about implementing
IBM mainframe systems.
State Street’s new building was completed in 1966 and became the first high-rise office
tower in downtown Boston.
In 1972 the company opened its first international office in Munich.
For much of the 1980s and 1990s it expanded to foreign markets with offices in Montreal,
Toronto, London, Paris, Dubai, Sydney, Wellington, Hong Kong, and Tokyo.
It was the early 1990s before State Street brought its technology platform to international
markets.
By 1992 most of State Street’s revenue came from fees for holding securities, settling
trades, keeping records, and performing accounting.
It formed a new global asset management business in 1994 and in 1999 divested its retail and
commercial banking businesses to Citizens Financial Group.
State Street acquired the Investors Fiduciary Trust Co in 1995.
In 2003 it purchased Deutsche Bank’s securities services division for $1.5 billion.
State Street purchased Investors Financial Services for $4.5 billion in 2007.
In 2010 it acquired Mourant International Finance Administration and the securities
services group of Intesa Sanpaolo.
State Street was named by the G-20 as amongst the world’s 29 systemic banks and must meet
all conditions of the Basel III accord.
The company now employs 29,530 people around the world.
It claims to have funds under management of $2.3 trillion and assets under custody and
administration of $28 trillion, second to The Bank of New York Mellon.
Organization State Street Global Advisors
Global Advisors is State Street’s asset management business and dates back to 1978.
It provides investment management, research, and advisory services to corporations, mutual
funds, insurance companies, and other institutional investors.
Global Advisors develops both passive and active management strategies using both quantitative
and fundamental approaches.
It created the first exchange-traded fund in 1993, the SPDR S&P 500, and is now one
of the world’s largest ETF providers.
Global Advisors has staff in 27 global offices and claims to have over $2.3 trillion of funds
under management.
State Street Global Markets Global Markets is State Street’s securities
business.
It offers research, trading, and securities lending services for foreign exchange, equities,
fixed income, and derivatives.
The company claims to be a trading partner free from conflicted interests as it does
not run proprietary trading books.
Global Markets maintains trading desks in Boston, London, Sydney, Toronto, and Tokyo.
State Street Global Services Global Services is the investment servicing
division of State Street, also known as the State Street Bank & Trust Co.
It provides asset owners and managers with custodian, fund accounting, and administration
services.
Global Services handles assets from many classes, including equities, derivatives, exchange-traded
funds, fixed income assets, private equity, and real estate.
State Street now administers 40 percent of the assets under administration in the US
mutual fund market.
Global Services also provides outsourcing for operations activities and handles $10.2
trillion of middle-office assets.
Regulation State Street is registered with the Board
of Governors of the Federal Reserve System as a bank holding company pursuant to the
Bank Holding Company Act of 1956.
It is a member of the Federal Reserve System and its deposits are insured by the Federal
Deposit Insurance Corporation.
Certain aspects of State Street’s public disclosure are subject to the requirements
of the Sarbanes–Oxley Act of 2002.
State Street’s broker-dealer operation, known as Global Markets, is registered with
and regulated by the Securities and Exchange Commission and the New York Stock Exchange
in the United States.
The Prudential Regulation Authority and the London Stock Exchange regulate State Street
in the United Kingdom.
Controversies In 2009 the State of California alleged on
behalf of its pension funds CalPERS and CalSTRS that State Street had committed fraud on currency
trades handled by the custodian bank.
Two executives from State Street Global Markets left the company in October 2011 following
enquiries over the pricing of a fixed income transaction.
State Street in December 2010 announced that it would be retrenching 5% of its workforce
and effectively reducing the wages of remaining employees by 10%.
In March 2011 it reversed its wage-reduction decision but declared that it would still
require all employees to work a longer 40 hour week.
On 28 February 2012, State Street Global Advisors entered into a consent order with the Massachusetts
Securities Division.
The Division was investigating SSGA’s role as the investment manager of a $1.65 billion
hybrid collateralized debt obligation.
The investigation resulted in a fine of $5 million for the non-disclosure of certain
initial investors taking a short position on portions of the CDO.
State Street has been criticized for using an outsourcing firm named Syntel to move jobs
from its headquarters and elsewhere to “campuses in India”.
Former employees argue that State Street is relocating jobs “in very small increments”
to avoid wider attention.
These allegations have arisen despite State Street being the recipient of tax breaks in
Boston for its status as a major employer.
Shouting protestors disrupted State Street’s annual meeting in 2012 and accused the company
of dodging taxes, outsourcing jobs, investing in a private prison, and defrauding pension
fund clients.
Jay Hooley, the Chairman and Chief Executive, denied these assertions.
See also State Street Bank v. Signature Financial Group
is the landmark case in which the Court of Appeals for the Federal Circuit ruled that
a computer algorithm can be patented to the extent that it produces "a useful, concrete
and tangible result".
References
External links State Street home page
IFS home page Boston Financial Data Services home page
Media Rooney, Emily, 2012, "State Street Outsourcing",
WGBH-TV Boston, 19 July