Massachusetts' chief securities regulator is invesitgating State Street Corp. over its handling of foreign exchange transactions.

Secretary of the Commonwealth William Galvin, whose office can pursue civil suits, has been examining the trades for two months, spokesman Brian McNiff said in an interview. Massachusetts Attorney General Martha Coakley last year declined to back a lawsuit initiated by whistle-blowers claiming fraud by the Boston company.

State Street has been sued by California and the Arkansas Teacher Retirement System for alleged fraud involving pricing of foreign exchange transactions. California asserted in October 2009 that State Street defrauded the state's two biggest public pension funds of $56 million. The state is seeking more than $200 million in damages and penalties.

"This is a real issue for State Street with all the litigation, although their exposure is somewhat contained because this represents a small piece of their overall revenue," Marty Mosby, an analyst at Guggenheim Securities LLC, said in an interview.

The type of bundled transactions that spurred the lawsuits accounted for $335 million in revenue in 2010, Edward Resch, State Street's chief financial officer said on an April 19 conference call.

State Street spokeswoman Alicia Curran declined to comment.

Coakley's office spent 15 months investigating claims made by Associates Against FX Insider Trading, a Delaware general partnership of unnamed whistle-blowers, and decided not to step in, based on court documents filed in July 2010.

The California suit was initiated by the same whistle-blower group, before the state's attorney general took over the case.

Harry Markopolos, a former money manager who tried to alert the Securities and Exchange Commission to Bernard Madoff's dealings, is helping the whistle-blower effort, according to a person with knowledge of the matter who asked not to be named since the information is not public. Markopolos declined to comment.

Bank of New York Mellon Corp. faces similar claims from Virginia, Florida and a public pension fund in Pennsylvania. Both companies have said they will defend against the suits.

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