Bank of America settles U.S. investigation for $2.5M

September 25, 2017

Bank of America Corp. (NYSE: BAC) has agreed to pay $2.5 million and make changes to report suspected conduct to the federal government. Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina, announced the settlement Friday.

 

The settlement resolves a U.S. investigation into trading activity by the bank’s “swaps desk” in New York City. Bank employees were trading ahead of block future trades with counterparties and then obstructed the CME Group’s investigation of the trading from 2009 to 2010.

 

Bank of America’s settlement with the U.S. was reached in 2015 and announced today alongside an announcement from the U.S. Commodity Futures Trading Commission on its settlement with Merrill, Lynch, Pierce, Fenner & Smith Inc. The CFTC was investigating Merrill Lynch’s supervision and recordkeeping failures related to the bank’s trading activity.

 

“The settlement underscores the expectation that everyone, from Wall Street to main street, act honestly and ethically in their financial transactions,” Rose said in a statement. “The financial system depends on the integrity of everyone involved in it. The settlement reinforces our expectation that firms effectively monitor their employees and deal candidly with all regulators and law enforcement agencies.”

 

Bank of America admitted at least three former traders on the swaps desk eavesdropped on calls between large financial counterparties and bank salespeople about block futures trades. They then used the information to hedge the bank’s expected risk from those block futures trades.

 

The traders did not disclose to the bank that they had eavesdropped on the calls, according to the settlement documents. Bank of America retracted its 2010 admission that the traders did not engage in pre-hedging when it learned of the government’s investigation.

 

The investigation was led by the FBI’s Charlotte Division and the Federal Housing Finance Agency, Office of Inspector General, Northeast Region.

Assistant U.S. Attorneys Daniel Ryan and Taylor Phillips, of the U.S. Attorney’s Office in Charlotte, represented the U.S. in the matter.

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