Jan. 31 (Bloomberg) -- State Street Corp.’s U.K. unit was fined 22.9 million pounds ($37.7 million) by the Financial Conduct Authority for charging clients “substantial” mark-ups without their consent.

State Street “developed and executed a deliberate strategy” to charge fees on top of agreed management or commission payments in a restructuring group at the asset manager, the FCA said in an e-mailed statement.

“State Street U.K. allowed a culture to develop in the U.K. Transitions Management business which prioritized revenue generation over the interests of its customers,” said Tracey McDermott, FCA director of enforcement and financial crime. “Their conduct has fallen far short of our expectations.”

From June 2010 until September 2011 State Street deliberately overcharged six clients a total of $20.2 million, the FCA said. State Street’s clients include large investment management firms and pension funds.

The firm received a 30 percent discount for settling early with the FCA, avoiding a larger fine of 32.7 million pounds.

“Over the past several years, we have worked hard to enhance our controls to address this unacceptable situation,” State Street said in an e-mailed statement. “The FCA in its notice is critical of our business controls within the U.K. transition management business and our control functions in the U.K. at that time. We acknowledge these as historical problems and have undertaken extensive efforts to address both.”

Instant Insights /

State Street fined $37.7 million by FCA over hidden client fees

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