On September 30, 2010, the SEC charged two former employees at State Street Bank and Trust Company with misleading investors about their exposure to subprime investments in State Street’s Limited Duration Bond Fund. The SEC charged State Street in a related case earlier this year, in which the firm agreed to settle the charges by repaying fund investors more than $300 million. When the SEC announced its settlement with State Street in February, it also announced that State Street had agreed—pursuant to a limited privilege waiver—to provide information to enable the SEC to assess the potential liability of individuals involved with State Street's investor communications about the fund.

According to the order, John P. Flannery, formerly the chief investment officer, and James D. Hopkins, formerly a product engineer, played an instrumental role in drafting a series of misleading communications beginning in July 2007. The communications to investors related to the effect of the turmoil in the subprime market on the Limited Duration Bond Fund and other State Street funds that invested in it. According to the SEC, State Street provided certain investors, including State Street’s internal advisory groups, with more complete information about the fund's subprime concentration and other problems with the fund.