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State Street’s Jay Hooley says he favors stricter trading rules in wake of JPMorgan Chase loss

State Street Corp. chief executive Jay Hooley said he is in favor of stricter trading rules in the wake of JPMorgan Chase & Co.’s $2 billion derivatives loss during an annual shareholders meeting Wednesday that was interrupted several times by protesters.

Hooley, in response to questions posed by investors at the meeting, said he didn’t fully understand what went wrong at JPMorgan, but he sees such mistakes through the lens of “reputational impact.”

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Hooley said State Street, a Boston-based manager of pension assets and custodian for large investment funds, does not engage in the kind of proprietary trading that’s at issue in the Volcker Rule, part of the Wall Street overhaul in the wake of the financial crisis.

“We do no hedging” related to State Street’s balance sheet, he said.

But he is generally in favor of reform -- “I’m all for it,’’ he said -- including creating a central clearinghouse for derivatives, in order to improve the safety and soundness of the system.

“The industry has lost a lot of confidence in the eyes of investors and the public,’’ Hooley said.

Hooley’s remarks came after a series of interruptions during the security-laden and normally staid annual meeting at the firm’s downtown headquarters building.

Dozens of protesters from MassUniting, a coalition of community, faith, and labor groups, held a rally outside the office tower before the 10 a.m. meeting, and a number spoke out during the meeting on the 36th floor of One Lincoln St., chanting “pay your fair share,” “stop killing jobs,” and “stop ripping off our pensions.”

Hooley was steely but clearly rattled at first, trying to shout down the protesters and at one point threatening to have them removed. At each outburst, security escorted the protesters out. It was a tense episode at a meeting that is generally silent and buttoned down, an uncomfortable meeting of the 1 percent and forces claiming to representing the 99 percent.

At one point Hooley joked, when there were no questions on a particular measure, “Phew.”

He later took questions from MassUniting members, who alleged that State Street has outsourced thousands of jobs, defrauded pension funds, invested in prison companies and lobbied lawmakers on issues to help the financial sector.

Hooley defended State Street’s employment practices, saying the company has added 23 percent more jobs over five years in Massachusetts. He said the company continues to add jobs here but also is willing to shift jobs to other cities and countries when it makes sense for customers. Hooley defended State Street on pensions, and allegations around foreign-exchange pricing that have led to lawsuits in several states, saying, “We in no way defraud pension systems.”

Regarding investments in for-profit prison company Corrections Corp. of America, Hooley said State Street’s investment arm owns shares in the company because it’s part of the Standard & Poor’s 500 Index. “We don’t make judgments about any individual corporation,’’ he said, but rather the company invests in the entire index passively, on behalf of clients.

When a community member urged the company to reconsider that approach, he was decisive: “We’re not going to.”

Tim Smith of Walden Asset Management, a socially responsible investment firm in Boston that frequently speaks out at State Street meetings and presses the company to adopt such changes as sustainable investment models and better disclosure of political donations, backed up the protesters on the prison matter. State Street should improve the way it votes on proxy issues on the many stocks it owns, Smith said. He said the company’s proxy department is “living in the closet.”

Beth Healy can be reached at
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