According to new reports, Bank of America (BofA) is investigating allegations that bankers in Asia shared nonpublic information with investors before the bank sold hundreds of millions of dollars’ worth of stock.
The whistleblower complaint alleged that bankers shared transaction details with investors before a stock sale in India was announced this spring, according to a copy of the complaint reviewed by the WSJ.
This potentially enabled the investors to engage in front running, or dealing in securities with advance, nonpublic knowledge of a pending transaction that will influence the price of the underlying security. In countries where it is illegal – such as India and the US – investors with such advance knowledge are prohibited from front-running their bets on how shares will perform and profit if the market moves as predicted.
Sharing nonpublic information about deals is also prohibited under BofA’s policies.
Whistleblower complaint
Company records shared with the WSJ showed that bankers in Asia contacted investors in March ahead of the deal cited in the whistleblower complaint, a roughly $200m sale of stock for a subsidiary of Indian conglomerate Aditya Birla and financial firm Sun Life.
People familiar with the sale said that bankers contacted investors via WhatsApp to share details of the transaction before it was announced.
The whistleblower’s complaint, filed in June, also cited separate concerns about the bank’s conduct in a roughly $500m initial public offering of stock for SoftBank-backed retailer FirstCry and a $300m rights offering for Carlyle-backed housing company PNB Housing Finance, according to the WSJ.
The whistleblower’s complaint was shared in June with India’s securities regulator as well as the head of investment banking for Bank of America in Asia.
Meetings on WhatsApp not reported
Company records reviewed by the WSJ show that ahead of the $200m public sale of stock for Aditya Birla, bankers sought meetings with investors, including quantitative-trading firm Jane Street, Norges Bank and life-insurance company HDFC Life. The sale was announced on March 18 and completed around March 20.
Many of the firms declined to, or didn’t, respond to the overture. But HDFC Life met with bankers and company executives to discuss the terms of the stock sale around a week before the sale occurred, WSJ‘s sources said. And the meetings with HDFC Life were set up via WhatsApp, these sources added.
“We take complaints seriously and thoroughly investigate them. At this time we have not found anything to support these allegations.”
Bank of America spokesperson, speaking to the WSJ
The bankers also kept unofficial records of the communications and meetings that took place, but they did not report them on the official roadshow system for the deal, the people said.
Work culture
BofA’s work culture has come under growing scrutiny after the recent death of a 35-year-old associate working for the investment bank in New York.
Evidence has shown some of its bankers are routinely instructed to lie about their hours to avoid exceeding hourly limits imposed by the bank, which were put in place over a decade ago after an intern died while working long hours.
After an investigation about these incidents was published in the WSJ, BofA urged staff to obey the rules and report the hours they work and to alert superiors or the human-resources department if they are being pressured to misreport hours.
Investigate the complaint
BofA has retained British law firm Clifford Chance and Indian firm J Sagar & Associates to investigate the whistleblower complaint, people familiar with the investigation told the WSJ. Lawyers from the firms are said to have recently interviewed senior and junior bankers involved in the transactions.
And a bank spokesperson issued this statement: “We take complaints seriously and thoroughly investigate them. At this time we have not found anything to support these allegations.”
