India’s markets regulator SEBI says a Bank of America (BofA) unit broke insider-trading rules while handling a big share sale in 2024. BofA was managing the sale of shares of Aditya Birla Sun Life Asset Management (ABSL AMC).
Once a bank is officially appointed to run a share sale, it must not share secret or price sensitive information with people who don’t strictly need to know, either outside the bank or even inside the bank but on other teams. SEBI says BofA didn’t follow this rule after investigating how the deal was managed and issued a notice to Bank of America.
What SEBI says BofA did wrong?
- Talked to investors too early – While in possession of non-public, price-sensitive information, Bank of America’s deal team approached potential investors ahead of the public announcement of the share sale, a move that is not permitted under insider-trading regulations.
- Broke its own internal firewalls (“Chinese walls”) – The deal team involved people from the broking, research, and Asia-Pacific syndicate teams, even though they were not supposed to take part at that stage. SEBI alleges that these teams shared valuation reports and other confidential information with potential investors, which raised concerns about possible violations of insider-trading and information-sharing rules.
- Reached out to specific big investors – SEBI named a few investors in its notice, including HDFC Life, Norges Bank of Norway, and Enam Holdings. According to the notice, Bank of America asked its broking team to share a valuation report with Enam, and its Hong Kong team contacted Norges Bank to check its interest in the share sale before the deal was made public.
- Did not follow “need-to-know” rules – SEBI said that the information was shared with more people than it should have been. Even though no one is reported to have traded using the information, SEBI believes this shows that Bank of America had weak internal controls.
What made things worse for the bank?
SEBI said that Bank of America changed its account during the investigation. At first, the bank denied holding any meetings or discussions with investors. Later, after SEBI presented evidence from the investors themselves, the bank admitted that such conversations had taken place. SEBI has accused the bank of suppressing important facts and making false or misleading statements, which is considered a serious matter by regulators.
