State Street Corp. (NYSE: STT) said today that its State Street Bank & Trust Co. unit received a Wells Notice from the Securities and Exchange Commission (SEC). The notice, which indicates that civil charges may be brought against the company, relates to disclosures and management of certain fixed-income strategies during 2007 and previous periods.
Some investors have accused State Street of misleading them about the risks involved in mortgage-related investments. A legal reserve fund worth $625 million was established in 2007 to cover investor claims, and $418 million has already been paid out. The firm says it is currently cooperating with the SEC, as well as state and other regulators.
STT was down more than 2% early as traders reacted to today's news. The stock's short-term uptrend has stalled out lately near the $48-to-$50 region; the shares have been pinned in this sideways channel throughout the month of June.
Resistance in this neighborhood could be augmented during the coming weeks by a hefty accumulation of call open interest at the July 50 strike. This out-of-the-money option boasts peak front-month open interest of 13,751 contracts, which could exert options-related resistance as expiration approaches.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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