UPDATE 3-State Street adds $250 mln to legal fund, cuts Q3

* $193 mln was left in $625 mln reserve set up in 2007

* Reduces previously reported Q3 EPS to $0.66

* SEC threatened State Street with civil charges

* State Street says in talks with SEC, other regulators (Adds regulatory filing details, stock price)

NEW YORK, Nov 6 (Reuters) - State Street Corp (STT.N: Quote, Profile, Research) set aside an additional $250 million to cover claims by investors who lost money on risky mortgages, after using up more than two-thirds of a $625 million legal reserve set up in 2007.

The Boston-based company, one of the world's largest institutional investors, also said in a quarterly filing that it has discussed settling fraud charges related to this matter with U.S. and state regulators.

State Street created the reserve after mortgage securities in accounts managed by its State Street Global Advisors unit lost value when credit markets tightened in the summer of 2007.

This led many unhappy investors to sue, and by Sept. 30, 2009 the reserve had fallen to $193 million. The additional sum boosts the reserve to $443 million.

State Street, which invests $1.7 trillion and has $17.9 trillion in custody assets, reduced its previously reported third-quarter results to reflect the larger reserve.