Bank of America Corp. has to pay $26 million to settle charges that its securities unit published fraudulent research reports on companies and failed to check leaks of reports that were used for improper trading, federal regulators said yesterday. It also marked the end of a six-year investigation into the company’s misuse of its own analysts’ research. The US Securities and Exchange Commission (SEC) said that the second-largest US bank agreed to $16m of civil fines and $10m of disgorgement. The company has also decided to appoint a consultant to review internal controls and stop leaks of research reports.
According to the SEC, Bank of America Securities LLC from January 1999 to December 2001 failed to detect and prevent employees’ misuse of forthcoming research reports. The SEC further informed that sales staff and traders learned about research reports before they were published, and traders generated improper profits at least twice as a result. At least on two occasions traders took the benefit of the leak and took positions in securities before releasing the research reports to clients.
The SEC was also accused the bank for failing to address conflicts of interest that compromised the independence and integrity of its analysts. In its official communique, Bank of America, ‘we believe it is in the best interest of the corporation and our shareholders to settle this matter at this time’. Moreover, the case has already cost the bank $10 million. The SEC had slapped the fine in 2004, after charging the bank of withholding documents and lying to investigators during the probe.
At the same time, in another case, the SEC and the New York Stock Exchange fined Goldman Sachs Group Inc. $2 million for failing to keep watch over illegal trades by customers in advance of public stock offerings.
