SEC charges 2 State Street employees with misleading investors

State Street employees charged in subprime case

NEW YORK — The Securities and Exchange Commission is charging two employees at State Street Bank and Trust Co. with misleading investors about their exposure to subprime investments.

The SEC says John Flannery and James Hopkins marketed the company’s limited duration bond fund as an alternative to a money market fund. But by 2007, the SEC says that fund was almost entirely invested in subprime mortgage-backed securities and derivatives.

Messages left with Hopkins and State Street’s media relations were not immediately returned. Flannery, who was chief investment officer at the time, is no longer with the company, according to the SEC.

Earlier this year, State Street agreed to settle a related case with the SEC by repaying investors more than $300 million.