SEC Slaps Bank of America With $10 Million Fine
March 15, 2004
Bank of America, the nation's third-largest bank, was slapped with a record $10 million fine last week for failing to comply with regulators' repeated requests for information during their probe of improper trading practices.
The Securities and Exchange Commission said it levied the fine against the Charlotte, N.C.-based bank amid its investigation to send a message to the rest of the financial services industry that it must produce e-mails and other documents in a timely fashion. The move marks the largest financial settlement for a failure to furnish documents on request. The firm has also agreed to be censured as part of the agreement.
The fine stems from an ongoing investigation into whether sell-side personnel at Banc of America Securities engaged in illegal trading prior to the release of its analyst research reports. The SEC claims the firm did not respond to several requests for information and when it did respond, it provided false or misleading information about the availability of documents. "Today's action makes clear that we will not tolerate unreasonable delay in responding to our inquiries and will act aggressively to protect the integrity of the Commission's investigative processes," said Stephen Cutler, director of the SEC's division of enforcement.
The enforcement action is the latest in a string of bad news for BoA, which has found itself implicated in probes of market timing and late trading in its mutual funds and in accounting fraud at Italian food company Parmalat, for which BoA was a primary lender. The company could reach a settlement with New York Attorney General Eliot Spitzer before the end of the month, according to recent press reports.
Specifically, the infractions committed by BoA included failure to deliver e-mail messages for seven managers between Jan. 1, 1999 and Nov. 8, 2001. The firm also failed to produce certain compliance reviews and compliance and supervision records containing the personal trading activities of a former senior employee.
In fact, one week after the Commission requested documents concerning trades made ahead of research, several boxes stored at on off-site facility of a third-party vendor were destroyed "inadvertently," the bank told regulators. In another instance, BoA cited technical glitches and a faulty back-up system as the reason for its delay in handing over documents.
The firm missed deadlines, did not file for extensions and did not provide adequate disclosure, the SEC said. Despite these obvious stalling efforts, Bank of America did not admit any wrongdoing as part of the settlement.
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