The National Pensions Reserve Fund (NPRF) has not ruled out legal action against State Street following an investigation that found the asset manager’s UK transition management service had “deliberately” overcharged the fund and five other clients.

Paul Carty, chairman of the NPRF Commission, told a parliamentary committee that it was still considering “what detriment was suffered and if there is any further action that has to be considered”.

However, speaking during the same Oireachtas committee of public accounts, National Treasury Management Agency (NTMA) chief executive John Corrigan confirmed that, while the Commission would “look at” legal action, he was uncertain if the route would be pursued.

“The legal advice we are getting is that it could be problematic,” he said. “Perhaps I should say no more, lest I prejudice a case if it is decided to take one.”

Corrigan, whose NTMA oversees the reserve fund, also confirmed that the NPRF was referred to as client A in a recent report by the UK’s Financial Conduct Authority, published alongside the regulator’s decision to fine the transition management business £23m (€28m) for its failings.

Following the announcement of the fine, the Commission announced that State Street Global Advisors (SSgA) had also been dropped as manager of equity mandates worth a total of €700m.

In the FCA’s report, the regulator detailed how staff within State Street’s transition management business discussed how best to “get more revenue” from a deal tendered by the NPRF – which saw the fund liquidate close to €5bn of its portfolio due to the need to contribute toward’s Ireland’s €85bn bailout.

One suggestion was to levy a 1-basis-point management fee “or something to that nature”, excluding any further commission, but to then take a spread of the deal.

“We need to charge a fee, then – otherwise, they get suspicious,” the FCA report further quoted internal exchanges.

Other exchanges discussed the possibility of raising further income after the fixed management fee levied on the third tranche of the transition was lowered from 1.65 basis points to 1.25bps.

One employee said there was a “need to be very creative” in generating other sources of revenue.

The unnamed employee then went on to outline what he believed should be done with “our new best friends”, adding the charge should be 1.65bps “for the privilege of working with us”.

The employee later concluded: “We HAVE (sic) to show revenue in our numbers.”

Corrigan said during the committee hearing that the overcharging had turned out to be “rogue behaviour”.

When the FCA fine was announced, State Street noted it had self-reported the incident to the regulator and “dismissed individuals centrally involved in the overcharging” in 2011.

“Also in 2011, we notified all transition management clients about the overcharging, only six of whom were directly affected,” the statement added.

State Street declined to comment on the potential for legal action, instead referring IPE to a previous statement issued in the wake of the NPRF’s termination of the mandates overseen by SSgA.

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