India regulator alleges Bank of America's local investment bank unit breached rules, document shows

By Jayshree P Upadhyay

MUMBAI, Jan 8 (Reuters) - India’s markets regulator has sought an explanation from Bank of America's (BofA) India securities unit on whether it, its compliance officer, and three former employees breached rules in a 2024 share sale, according to a regulatory notice reviewed by Reuters.

The show-cause notice, dated October 30, followed SEBI’s investigation into BofA Securities’ conduct in managing a March 2024 stock sale of Aditya Birla Sun Life Asset Management Co. (ABSL AMC) ADIE.NS.

The Wall Street Journal first reported on Wednesday that the Securities and Exchange Board of India (SEBI) had sent a notice to the American bank. Reuters is reporting the details of the allegations.

The case first came to light in 2024 via a whistleblower complaint, which led to an internal bank probe and the exit of senior officials. SEBI’s notice, marking its first regulatory action against the bank, has not been previously reported.

BofASI has filed an application to settle the charges without admitting guilt, a source with direct knowledge of the matter said. The application is under review, added the source, who spoke on condition of anonymity due to the sensitive nature of the issue.

Email queries to the bank and SEBI on Wednesday morning have yet to be answered.

CHINESE WALLS BREACHED

SEBI alleges BofASI violated the regulator's insider trading norms and the merchant banking code of conduct.

In its notice, the regulator said there was a breakdown of “Chinese walls” between the deals team and the firm’s research and broking arms, suppression of material facts, and false statements during the probe.

The regulator's investigation found the deal team, while holding unpublished price-sensitive information (UPSI) about ABSL AMC’s share sale, contacted potential investors directly and indirectly.

At BofASI's deal team request, the broking arm, research team, and Asia-Pacific (APAC) syndicate team reached out to investors and shared valuation reports and other confidential details, the notice said.

“The conduct highlights failure of BofASI’s deal team to maintain Chinese walls with broking/research arms, impacting safekeeping of confidential information and internal controls,” SEBI said.