Bank of America hit by graft charge on India stock deals

Bank of America has been hit by a whistleblower complaint that its officials in Asia had shared “non-public information” with investors “before the bank sold hundreds of millions of dollars of stock”, reports the Wall Street Journal.

Following the complaint, Bank of America has opened an internal investigation into the allegation, reports Alexander Saeedy in the WSJ.

A Bank of America spokesman told the newspaper, “We take complaints seriously and thoroughly investigate them. At this time we have not found anything to support these allegations.”

Bankers are said to have contacted investors via WhatsApp to share transaction details before the announcement was made, WSJ has reported.

Bank of America has retained British law firm Clifford Chance and Indian firm J Sagar & Associates to investigate the whistleblower complaint, WSJ reported quoting people familiar with the investigation. Lawyers from the firms have interviewed senior and junior bankers involved in the transactions, the newspaper further reported.

WSJ also reported that it has reviewed a copy of the complaint alleging that bank officials had shared transaction details with investors before a stock sale was announced in India, which could lead the investors to engage in trade practice known on Wall Street as ‘front-running’ and is prohibited under the US SEC’s code of ethics. Sharing of non-public information on deals is also prohibited by Bank of America.

The Indian stock sale pertained to a subsidiary of the Aditya Birla group and financial firm Sun Life, and amounted to roughly $200 million of stock.

Other complaints raised by the whistleblower pertained to a roughly $500 million IPO for SoftBank-backed FirstCry, and a $300 million rights offering for PNB Housing Finance.

For Bank of America’s investment banking franchise in Asia, large trades of stock for corporate clients in India form a major source of revenue, WSJ reported. 

The whistleblower complaint about Bank of America comes on the heels of Morgan Stanley paying $249 million in the US in January following allegations that some employees improperly shared information about clients’ stock sales, the WSJ added.