State Street is being sued on behalf of certain defined benefits and defined contribution clients of a Prudential Financial subsidiary.

The suit seeks restitution of approximately US$80 million in losses attributable to funds sold by State Street which “employed investment strategies and practices that were misrepresented” and “failed to exercise the standard of care of a prudent investment manager,” says a filing with the Securities and Exchange Commission.

In its lawsuit, Prudential claims that it placed clients in two State Street bond funds because they were marketed as investments that would provide “stable” and “predictable” returns similar to an index of U.S. corporate and government bonds.

It also alleges that State Street changed the investment strategy without notification to make “undisclosed, highly leveraged investments in mortgage-related” assets, some of which were associated to subprime loans.

State Street intends to “vigorously” defend itself, according to a company spokesperson.

For more about the subprime mortgage mess, click here to read Subprime Woes.

To comment on this story, email craig.sebastiano@rci.rogers.com.

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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